GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 2

GOODWILL AND INTANGIBLE ASSETS

The change in the net carrying amount of goodwill by reportable segment was as follows:



	Beauty			Grooming			Health Care		Fabric Care and Home Care			Baby, Feminine and Family Care		Corporate			Total Company
GOODWILL at JUNE 30, 2012 - Gross	$	16,860		$	21,579		$	6,115	$	4,424		$	3,684	$	2,441		$	55,103
Accumulated impairment losses at June 30, 2012	(431		)	(899		)	—		—			—		—			(1,330		)
GOODWILL at JUNE 30, 2012 - Net	16,429			20,680			6,115		4,424			3,684		2,441			53,773
Acquisitions and divestitures	(21		)	(40		)	—		(14		)	1,090		—			1,015
Goodwill impairment charges	—			(259		)	—		—			—		—			(259		)
Translation and other	255			236			70		43			54		1			659
GOODWILL at JUNE 30, 2013 - Gross	17,094			21,775			6,185		4,453			4,828		2,442			56,777
Accumulated impairment losses at June 30, 2013	(431		)	(1,158		)	—		—			—		—			(1,589		)
GOODWILL at JUNE 30, 2013 - Net	16,663			20,617			6,185		4,453			4,828		2,442			55,188
Acquisitions and divestitures	—			—			—		(3		)	—		(2,445		)	(2,448		)
Translation and other	377			322			95		85			82		3			964
GOODWILL at JUNE 30, 2014 - Gross	17,471			22,097			6,280		4,535			4,910		—			55,293
Accumulated impairment losses at June 30, 2014	(431		)	(1,158		)	—		—			—		—			(1,589		)
GOODWILL at JUNE 30, 2014 - Net	17,040			20,939			6,280		4,535			4,910		—			53,704

On July 31, 2014, the Company completed the divestiture of its Pet Care operations in North America, Latin America and other selected countries. The Company is pursuing alternate plans to sell its Pet Care business in the other markets, primarily the European Union countries. As a result, the Pet Care goodwill is included in the Corporate Segment as of June 30, 2013 and 2012. Pet Care goodwill and intangible assets at June 30, 2014 are reported in assets held for sale. The remaining change in goodwill since June 30, 2013 was primarily due to currency translation across all reportable segments.

The results of our goodwill impairment testing during fiscal 2013 determined that the estimated fair value of our Appliances reporting unit declined below its carrying amount. As a result, we recorded a non-cash before and after-tax impairment charge of $259, in fiscal 2013, to reduce the carrying amount of goodwill to estimated fair value. We also recorded a non-cash before-tax impairment charge of $49 ($31 after-tax) to reduce the carrying amount of our Braun indefinite-lived trade name intangible asset to its fair value. The fiscal 2013 declines in fair values of the Appliances reporting unit and the Braun trade name intangible asset were primarily driven by currency impacts. Specifically, currency in Japan, a country that generates a significant portion of the Appliances earnings, devalued approximately 20% in the second half of fiscal 2013 relative to the currencies in which the underlying net assets are recorded. This sustained reduction in the yen reduced the underlying category market size and the projected future cash flows of the business, which in turn triggered the impairment.

In October 2012, the Company acquired our partner's interest in a joint venture in Iberia that operates in our Baby Care and Family Care and Health Care reportable segments. We paid $1.1 billion for our partner's interest and the transaction was accounted for as a business combination. The total enterprise value of $1.9 billion was allocated to indefinite-lived intangible assets of $0.2 billion, defined-life intangible assets of $0.9 billion and goodwill of $1.1 billion. These were partially offset by $0.3 billion of deferred tax liabilities on the intangible assets. The Company recognized a $0.6 billion holding gain on its previously held investment, which was included in other non-operating income, net in the Consolidated Statement of Earnings in fiscal 2013. In addition to these items and the impairment discussed above, the remaining net increase in goodwill during fiscal 2013 was primarily due to currency translation across all reportable segments.

The results of our goodwill impairment testing during fiscal 2012 determined that the estimated fair values of our Appliances and Salon Professional reporting units were less than their respective carrying amounts. As a result, we recorded a non-cash before and after-tax impairment charge of $1.3 billion in fiscal 2012 to reduce the carrying amount of goodwill to estimated fair value. $899 of the impairment related to Appliances and $431 related to Salon Professional. Our impairment testing for indefinite-lived intangible assets during fiscal 2012 also indicated a decline in the fair value of our Koleston Perfect and Wella trade name intangible assets below their respective carrying values. This resulted in a non-cash before-tax impairment charge of $246 ($173 after-tax) to reduce the carrying amounts of these assets to their respective values. The fiscal 2012 declines in the fair values of the Appliances and Salon Professional reporting units and the underlying Koleston Perfect and Wella trade name intangible assets were driven by a combination of competitive and economic factors, which resulted in a reduction in the forecasted growth rates and cash flows used to estimate fair value.

All of the goodwill and indefinite-lived intangible asset impairment charges are included in Corporate for segment reporting.

The goodwill and intangible asset valuations are dependent on a number of significant estimates and assumptions, including macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin expansion and Company business plans. We believe these estimates and assumptions are reasonable. However, actual events and results could differ substantially from those used in our valuations. To the extent such factors result in a failure to achieve the level of projected cash flows used to estimate fair value, we may need to record additional non-cash impairment charges in the future.

Identifiable intangible assets were comprised of:



	2014					2013
June 30	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
INTANGIBLE ASSETS WITH DETERMINABLE LIVES
Brands	$	4,154	$	(2,205	)	$	4,251	$	(2,020	)
Patents and technology	2,850		(2,082		)	2,976		(2,032		)
Customer relationships	2,002		(763		)	2,118		(703		)
Other	355		(164		)	348		(168		)
TOTAL	9,361		(5,214		)	9,693		(4,923		)

INTANGIBLE ASSETS WITH INDEFINITE LIVES
Brands	26,696		—			26,802		—
TOTAL	36,057		(5,214		)	36,495		(4,923		)

Due to the divestiture of the Pet Care business, intangible assets specific to the Pet Care business are reported in assets held for sale in accordance with the accounting principles for assets held for sale as of June 30, 2014.

Amortization expense of intangible assets was as follows:



Years ended June 30	2014		2013		2012
Intangible asset amortization	$	514	$	528	$	500

Estimated amortization expense over the next five fiscal years is as follows:



Years ended June 30	2015		2016		2017		2018		2019
Estimated amortization expense	$	432	$	393	$	360	$	332	$	309

These estimates do not reflect the impact of future foreign exchange rate changes.

- 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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