Intangible Assets and Goodwill

9 Months Ended

Jun. 02, 2016

Goodwill and Intangible Assets Disclosure [Abstract]



As of	June 2, 2016					September 3, 2015
	Gross Amount		Accumulated Amortization			Gross Amount		Accumulated Amortization
Amortizing assets
Product and process technology	$	824	$	(442	)	$	864	$	(416	)
Other	1		—			2		(1		)
	825		(442		)	866		(417		)
Non-amortizing assets
In-process R&D	108		—			—		—

	$	933	$	(442	)	$	866	$	(417	)

Goodwill⁽¹⁾	$	104				$	23


⁽¹⁾	Included in other noncurrent assets.

During the first nine months of 2016 and 2015, we capitalized $24 million and $51 million, respectively, for product and process technology with weighted-average useful lives of 10 years and seven years, respectively. Amortization expense was $30 million and $90 million for the third quarter and first nine months of 2016, respectively, and $29 million and $89 million for the third quarter and first nine months of 2015, respectively. The expected annual amortization expense for amortizing intangible assets held as of June 2, 2016 is $119 million for 2016, $107 million for 2017, $94 million for 2018, $46 million for 2019, and $28 million for 2020.

In the first quarter of 2016, we acquired Tidal Systems, Ltd., a developer of PCIe NAND Flash storage controllers, to enhance our NAND Flash controller technology for $148 million. In connection therewith, we recognized $108 million of in-process R&D; $81 million of goodwill, which was derived from expected cost reductions and other synergies and was assigned to our Storage Business Unit; and $41 million of deferred tax liabilities; which, in aggregate, represented substantially all of the purchase price. The in-process R&D was valued using a replacement cost approach, which included inputs of reproduction cost, including developer's profit, and opportunity cost. We will begin amortizing the in-process R&D when development is complete, which is estimated to be in 2017, and will amortize it over its then estimated useful life. The goodwill is not expected to be deductible for tax purposes.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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