Goodwill and Other Intangible Assets

6 Months Ended

Jun. 29, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

A. Goodwill

Our businesses were previously managed through four operating segments (Primary Care, Specialty Care and Oncology, Established Products and Emerging Markets, and Consumer Healthcare) and, since the beginning of fiscal 2014, our businesses are now managed through three different operating segments: the Global Innovative Pharmaceutical segment (GIP); the Global Vaccines, Oncology and Consumer Healthcare segment (VOC); and the Global Established Pharmaceutical segment (GEP). For additional information, see Note 13. Segment, Geographic and Other Revenue Information.

As a result of this change, our goodwill is required to be reallocated to the new reporting units. The allocation of goodwill is a complex process that requires, among other things, that we determine the fair value of each reporting unit. We have not yet completed the allocation, but we expect that it will be completed in the current year.



The following table provides the components of and changes in the carrying amount of Goodwill:
(MILLIONS OF DOLLARS)	GIP	VOC	GEP	To be Allocated^(a)		Total
Balance, December 31, 2013	$	$	$	$	42,519	$	42,519
Additions				—		—
Other^(b)				142		142
Balance, June 29, 2014	$	$	$	$	42,661	$	42,661


^(a)	The amount to be allocated includes the goodwill associated with our former biopharmaceutical operating segments (see above), for which the allocation to our new reporting units, and, as a result, to the new operating segments, is pending.


^(b)	Primarily reflects the impact of foreign exchange.

B. Other Intangible Assets

Balance Sheet Information



The following table provides the components of Identifiable intangible assets:
	June 29, 2014							December 31, 2013
(MILLIONS OF DOLLARS)	Gross Carrying Amount		Accumulated Amortization			Identifiable Intangible Assets, less Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			Identifiable Intangible Assets, less Accumulated Amortization
Finite-lived intangible assets
Developed technology rights	$	72,030	$	(43,599	)	$	28,431	$	72,038	$	(41,541	)	$	30,497
Brands	1,944		(815		)	1,129		1,743		(773		)	970
Licensing agreements and other	921		(824		)	97		896		(805		)	91
	74,895		(45,238		)	29,657		74,677		(43,119		)	31,558
Indefinite-lived intangible assets
Brands and other	7,374					7,374		7,384					7,384
In-process research and development	329					329		443					443
	7,703					7,703		7,827					7,827
Identifiable intangible assets^(a)	$	82,598	$	(45,238	)	$	37,360	$	82,504	$	(43,119	)	$	39,385

^(a)

The decrease in identifiable intangible assets, less accumulated amortization, is primarily related to amortization and, to a much lesser extent, asset impairment charges, partially offset by the Nexium over-the-counter milestone. For information about impairments of intangible assets, see Note 4. Other (Income)/Deductions—Net. For information about the Nexium over-the-counter milestone, see Note 2A. Acquisition, Divestiture, Collaborative Arrangement and Equity-Method Investments: Acquisition.



Our identifiable intangible assets are associated with the following, as a percentage of total identifiable intangible assets, less accumulated amortization:
	June 29, 2014
	GIP		VOC		GEP		WRD^(a)
Developed technology rights	34	%	32	%	34	%	—	%
Brands, finite-lived	—	%	80	%	20	%	—	%
Brands, indefinite-lived	—	%	69	%	31	%	—	%
In-process research and development	9	%	58	%	9	%	24	%


^(a)	Worldwide Research and Development.

Amortization

Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization expense related to intangible assets that are associated with a single function is included in Cost of sales, Selling, informational and administrative expenses or Research and development expenses, as appropriate. Total amortization expense for finite-lived intangible assets was $1.0 billion for the second quarter of 2014 and $1.2 billion for the second quarter of 2013, and $2.2 billion for the first six months of 2014 and $2.5 billion for the first six months of 2013.

Impairment Charges

For information about impairments of intangible assets, see Note 4. Other (Income)/Deductions—Net.

For IPR&D assets, the risk of failure is significant and there can be no certainty that these assets ultimately will yield a successful product. The nature of the biopharmaceutical business is high-risk and, as such, we expect that many of these IPR&D assets will become impaired and be written off at some time in the future.

- 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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