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Intangible Assets Including Goodwill
9 Months Ended
Sep. 30, 2020
Intangible Assets Including Goodwill  
Intangible Assets Including Goodwill

10. Intangible Assets Including Goodwill: 

Intangible Assets

The following table presents the company's intangible asset balances by major asset class:

At September 30, 2020

    

Gross Carrying

    

Accumulated

    

Net Carrying

(Dollars in millions)

Amount

Amortization

Amount*

Intangible asset class

Capitalized software

$

1,769

$

(785)

$

984

Client relationships

 

8,698

 

(1,852)

 

6,847

Completed technology

 

5,900

 

(1,531)

 

4,369

Patents/trademarks

 

2,210

 

(467)

 

1,743

Other**

 

56

 

(37)

 

18

Total

$

18,634

$

(4,672)

$

13,962

At December 31, 2019

    

Gross Carrying

    

Accumulated

    

Net Carrying

(Dollars in millions)

Amount

Amortization

Amount*

Intangible asset class

Capitalized software

$

1,749

$

(743)

$

1,006

Client relationships

 

8,921

 

(1,433)

 

7,488

Completed technology

 

6,261

 

(1,400)

 

4,861

Patents/trademarks

 

2,301

 

(445)

 

1,856

Other**

 

56

 

(31)

 

24

Total

$

19,287

$

(4,052)

$

15,235

*  Amounts as of September 30, 2020 and December 31, 2019 include an increase in net intangible asset balances of $133 million and a decrease of $42 million, respectively, due to foreign currency translation.

**

Other intangibles are primarily acquired proprietary and non-proprietary business processes, methodologies and systems.

The net carrying amount of intangible assets decreased $1,273 million during the first nine months of 2020, primarily due to intangible asset amortization, partially offset by additions of capitalized software. The aggregate intangible asset amortization expense was $613 million and $1,858 million for the third quarter and first nine months of 2020, respectively, versus $614 million and $1,224 million for the third quarter and first nine months of 2019, respectively. The increase in intangible amortization expense for the first nine months of 2020 was primarily due to an increase in the gross carrying amount of intangible assets from the Red Hat acquisition which closed in the third quarter of 2019. In addition, in the first nine months of 2020, the company retired $1,258 million of fully amortized intangible assets, impacting both the gross carrying amount and accumulated amortization by this amount.

The future amortization expense relating to intangible assets currently recorded in the Consolidated Balance Sheet is estimated to be the following at September 30, 2020:

    

Capitalized

    

Acquired

    

    

(Dollars in millions)

Software

Intangibles

Total

Remainder of 2020

$

154

$

454

$

608

2021

 

501

 

1,766

 

2,267

2022

 

261

 

1,704

 

1,964

2023

 

68

 

1,390

 

1,458

2024

 

0

 

1,340

 

1,340

Thereafter

6,324

 

6,324

Goodwill

The changes in the goodwill balances by segment for the nine months ended September 30, 2020 and for the year ended December 31, 2019 are as follows:

    

    

    

    

    

    

    

    

    

Foreign

    

    

Currency

Purchase

Translation

(Dollars in millions)

Balance

Goodwill

Price

And Other

Balance

Segment

1/1/2020

Additions

Adjustments

Divestitures

Adjustments**

9/30/2020

Cloud & Cognitive Software

$

43,037

$

25

$

(139)

$

$

186

$

43,109

Global Business Services

 

5,775

 

 

 

 

47

 

5,822

Global Technology Services

 

7,141

 

 

 

 

13

 

7,154

Systems

 

2,270

 

 

 

 

1

 

2,270

Other—divested businesses

 

 

 

 

 

 

Total

$

58,222

$

25

$

(139)

$

$

248

$

58,355

    

    

    

    

    

    

    

    

    

Foreign

    

    

Currency

Purchase

Translation

(Dollars in millions)

Balance

Goodwill

Price

And Other

Balance

Segment

1/1/2019

Additions

Adjustments

Divestitures

Adjustments**

12/31/2019

Cloud & Cognitive Software*

$

24,463

$

18,399

$

133

$

$

41

$

43,037

Global Business Services

 

4,711

 

1,059

 

1

 

(1)

 

5

 

5,775

Global Technology Services

 

3,988

 

3,119

 

 

 

34

 

7,141

Systems

 

1,847

 

525

 

(110)

 

 

7

 

2,270

Other—divested businesses*

 

1,256

 

 

 

(1,256)

 

 

Total

$

36,265

$

23,102

$

24

$

(1,257)

$

87

$

58,222

* Recast to conform to 2020 presentation.

** Primarily driven by foreign currency translation.

There were no goodwill impairment losses recorded during the first nine months of 2020 or full year 2019 and the company has no accumulated impairment losses.

Purchase price adjustments recorded in the first nine months of 2020 and full year 2019 were related to acquisitions that were still subject to the measurement period that ends at the earlier of 12 months from the acquisition date or when information becomes available. During the first nine months of 2020, net purchase price adjustments recorded to noncurrent tax assets and liabilities were related to the Red Hat acquisition. Net purchase price adjustments recorded in full-year 2019 were not material.