Goodwill and Other Intangible Assets

9 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

4. Goodwill and Other Intangible Assets

Goodwill

The following table summarizes the changes in the carrying amount of goodwill by segment and in total:

(in millions)	Pharmaceutical		Medical (1)		Total
Balance at June 30, 2022	$	2,673	$	3,182	$	5,855
Goodwill acquired, net of purchase price adjustments	—		13		13
Foreign currency translation adjustments and other	—		(5)		(5)
Goodwill impairment	—		(863)		(863)
Balance at March 31, 2023	$	2,673	$	2,327	$	5,000

(1)At March 31, 2023 and June 30, 2022, the Medical segment accumulated goodwill impairment loss was $4.4 billion and $3.5 billion, respectively.

Due to changes in our long-term financial plan assumptions made during the three months ended March 31, 2023, we elected to bypass the qualitative assessment and perform quantitative goodwill impairment testing for the Medical Unit. The fair value of the reporting unit was estimated to be approximately 4 percent in excess of its carrying value, primarily driven by a lower discount rate as described below.

We performed quantitative goodwill impairment testing for the Medical Unit at December 31, 2022 and September 30, 2022, which resulted in pre-tax goodwill impairment charges of $709 million and $154 million, respectively. The impairment charge recognized in the second quarter was driven by certain reductions in our long-term financial plan assumptions, and the impairment charge recognized in the first quarter was driven by an increase in the discount rate primarily due to an increase in the risk-free interest rate. The cumulative pre-tax goodwill impairment charges of $863 million were recognized in impairments and (gain)/loss on disposal of assets, net in our condensed consolidated statements of earnings/(loss) for the nine months ended March 31, 2023.

Our determinations of the estimated fair value of the Medical Unit at March 31, 2023, December 31, 2022 and September 30, 2022 were based on a combination of the income-based approach (using a terminal growth rate of 2 percent), and the market-based approaches. For the income-based approach, we used discount rates of 10 percent, 10.5 percent and 10.5 percent for each quarter, respectively. The decrease in the discount rate for the interim testing performed at March 31, 2023 was primarily due to a decrease in the risk-free interest rate. Additionally, we assigned a weighting of 80 percent to the discounted cash flow method, 10 percent to the guideline public company method, and 10 percent to the guideline transaction method. Our fair value estimates utilize significant unobservable inputs and thus represent Level 3 fair value measurements.

During the three months ended March 31, 2022 and December 31, 2021, we performed quantitative goodwill impairment testing for the Medical Unit. This quantitative testing resulted in the carrying

amount of the Medical Unit exceeding the fair value, resulting in a pre-tax impairment charges of $474 million and $1.3 billion recorded during the three months ended March 31, 2022 and December 31, 2021, respectively.

Other Intangible Assets

The following tables summarize other intangible assets by class at:

	March 31, 2023
(in millions)	Gross Intangible		Accumulated Amortization		Net Intangible		Weighted- Average Remaining Amortization Period (Years)
Indefinite-life intangibles:
Trademarks and patents	$	11	$	—	$	11	N/A
Total indefinite-life intangibles	11		—		11		N/A
Definite-life intangibles:
Customer relationships	3,235		2,267		968		10
Trademarks, trade names and patents	550		376		174		9
Developed technology and other	1,037		623		414		9
Total definite-life intangibles	4,822		3,266		1,556		10
Total other intangible assets	$	4,833	$	3,266	$	1,567	N/A

	June 30, 2022
(in millions)	Gross Intangible		Accumulated Amortization		Net Intangible
Indefinite-life intangibles:
Trademarks and patents	$	11	$	—	$	11
Total indefinite-life intangibles	11		—		11
Definite-life intangibles:
Customer relationships	3,272		2,165		1,107
Trademarks, trade names and patents	552		360		192
Developed technology and other	1,038		574		464
Total definite-life intangibles	4,862		3,099		1,763
Total other intangible assets	$	4,873	$	3,099	$	1,774

Total amortization of intangible assets was $69 million and $78 million for the three months ended March 31, 2023 and 2022, respectively, and $211 million and $235 million for the nine months ended March 31, 2023 and 2022, respectively. Estimated annual amortization of intangible assets for the remainder of fiscal 2023 through 2027 is as follows: $71 million, $261 million, $236 million, $209 million and $177 million.