Applied’s methodology for allocating the purchase price relating to purchase acquisitions is determined through established and generally accepted valuation techniques. Goodwill is measured as the excess of the purchase price over the sum of the amounts assigned to tangible and identifiable intangible assets acquired less liabilities assumed. Applied assigns assets acquired (including goodwill) and liabilities assumed to one or more reporting units as of the date of acquisition. Typically, acquisitions relate to a single reporting unit and thus do not require the allocation of goodwill to multiple reporting units. If the products obtained in an acquisition are assigned to multiple reporting units, the goodwill is distributed to the respective reporting units as part of the purchase price allocation process.

Goodwill and purchased intangible assets with indefinite useful lives are not amortized but are reviewed for impairment annually during the fourth quarter of each fiscal year and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The process of evaluating the potential impairment of goodwill and intangible assets requires significant judgment, especially in emerging markets. When reviewing goodwill for impairment, Applied first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

In performing a qualitative assessment, Applied considers business conditions and other factors including, but not limited to (i) adverse industry or economic trends, (ii) restructuring actions and lower projections that may impact future operating results, (iii) sustained decline in share price, and (iv) overall financial performance and other events affecting the reporting units. If Applied concludes that is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a quantitative impairment test is performed by estimating the fair value of the reporting unit and comparing it to its carrying value. If the carrying value of a reporting unit exceeds its fair value, Applied would record an impairment charge equal to the excess of the carrying value of the reporting unit’s goodwill over its fair value.

As of July 31, 2022, Applied’s reporting units include Semiconductor Products Group and Imaging and Process Control Group, which combine to form the Semiconductor Systems reporting segment, Applied Global Services, Display and Adjacent Markets and other reporting units recorded under Corporate and Other.


	July 31, 2022						October 31, 2021
	Goodwill		Indefinite-lived Intangible Assets		Total		Goodwill		Indefinite-lived Intangible Assets		Total

	(In millions)
Semiconductor Systems	$	2,441	$	16	$	2,457	$	2,207	$	—	$	2,207
Applied Global Services	1,032		—		1,032		1,032		—		1,032
Display and Adjacent Markets	199		—		199		199		—		199
Corporate and Other	41		—		41		41		—		41
Carrying amount	$	3,713	$	16	$	3,729	$	3,479	$	—	$	3,479

From time to time, Applied makes acquisitions of companies related to existing or new markets for Applied. During the first nine months of fiscal 2022, goodwill and indefinite-lived intangible assets increased by $234 million and $16 million, respectively, primarily due to the preliminary purchase accounting for acquisitions during the third quarter of fiscal 2022, which were not material to Applied’s results of operations.


	July 31, 2022		October 31, 2021

	(In millions)
Purchased technology, net	$	255	$	46
Intangible assets - finite-lived, net	66		58
Intangible assets - indefinite-lived	16		—
Total	$	337	$	104

The increase in purchased technology and intangible assets during the first nine months of fiscal 2022 was primarily due to the preliminary purchase accounting for acquisitions during the third quarter of fiscal 2022, which were not material to Applied’s results of operations.

Intangible assets that are not subject to amortization consist primarily of in-process technology, which will be subject to amortization upon commercialization. If an in-process technology project is abandoned, the acquired technology attributable to the project will be written-off.

Applied amortizes purchased intangible assets with finite lives using the straight-line method over the estimated economic lives of the assets, ranging from 1 to 15 years.

Applied evaluates long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset group may not be recoverable. Applied assesses the fair value of the assets based on the amount of the undiscounted future cash flow that the assets are expected to generate and recognizes an impairment loss when estimated undiscounted future cash flow expected to result from the use of the asset, plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When Applied identifies an impairment, Applied reduces the carrying value of the group of assets to comparable market values, when available and appropriate, or to its estimated fair value based on a discounted cash flow approach.

Intangible assets, such as purchased technology, are generally recorded in connection with a business acquisition. The value assigned to intangible assets is usually based on estimates and judgments regarding expectations for the success and life cycle of products and technology acquired. Applied evaluates the useful lives of its intangible assets each reporting period to determine whether events and circumstances require revising the remaining period of amortization. In addition, Applied reviews intangible assets for impairment when events or changes in circumstances indicate their carrying value may not be recoverable. Management considers such indicators as significant differences in actual product acceptance from the estimates, changes in the competitive and economic environments, technological advances, and changes in cost structure.


	July 31, 2022						October 31, 2021
	Purchased Technology		Other Intangible Assets		Total		Purchased Technology		Other Intangible Assets		Total

	(In millions)
Gross carrying amount:
Semiconductor Systems	$	1,700	$	274	$	1,974	$	1,476	$	256	$	1,732
Applied Global Services	35		44		79		35		44		79
Display and Adjacent Markets	158		36		194		163		38		201
Corporate and Other	18		18		36		13		16		29
Gross carrying amount	$	1,911	$	372	$	2,283	$	1,687	$	354	$	2,041
Accumulated amortization:
Semiconductor Systems	$	(1,455)	$	(211)	$	(1,666)	$	(1,446)	$	(203)	$	(1,649)
Applied Global Services	(33)		(44)		(77)		(32)		(44)		(76)
Display and Adjacent Markets	(158)		(36)		(194)		(161)		(38)		(199)
Corporate and Other	(10)		(15)		(25)		(2)		(11)		(13)
Accumulated amortization	$	(1,656)	$	(306)	$	(1,962)	$	(1,641)	$	(296)	$	(1,937)
Carrying amount	$	255	$	66	$	321	$	46	$	58	$	104


	Three Months Ended				Nine Months Ended
	July 31, 2022		August 1, 2021		July 31, 2022		August 1, 2021
	(In millions)
Semiconductor Systems	$	9	$	9	$	22	$	31
Applied Global Services	—		1		1		1
Display and Adjacent Markets	—		1		2		4
Corporate & Other	2		—		5		1
Total	$	11	$	11	$	30	$	37


	Three Months Ended				Nine Months Ended
	July 31, 2022		August 1, 2021		July 31, 2022		August 1, 2021

	(In millions)
Cost of products sold	$	7	$	7	$	20	$	22
Research, development and engineering	—		—		—		1
Marketing and selling	4		4		10		14

Total	$	11	$	11	$	30	$	37