GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

GOODWILL AND INTANGIBLE ASSETS

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



	Beauty			Grooming			Health Care			Fabric & Home Care			Baby, Feminine & Family Care			Corporate		Total Company
Balance at June 30, 2017 - Net ⁽¹⁾	$	12,791		$	19,627		$	5,878		$	1,857		$	4,546		$	—	$	44,699
Acquisitions and divestitures	82			—			—			—			—			—		82
Translation and other	119			193			51			8			23			—		394
Balance at June 30, 2018 - Net ⁽¹⁾	12,992			19,820			5,929			1,865			4,569			—		45,175
Acquisitions and divestitures	132			—			2,084			6			57			—		2,279
Goodwill impairment charges	—			(6,783		)	—			—			—			—		(6,783		)
Translation and other	(139		)	(156		)	(41		)	(16		)	(46		)	—		(398		)
Balance at June 30, 2019 - Net ⁽¹⁾	$	12,985		$	12,881		$	7,972		$	1,855		$	4,580		$	—	$	40,273

⁽¹⁾

Grooming goodwill balance is net of $1.2 billion accumulated impairment losses as of June 30, 2017 and 2018 and $7.9 billion as of June 30, 2019.

Goodwill and indefinite-lived intangibles are tested for impairment at least annually by comparing the estimated fair values of our reporting units and underlying indefinite-lived intangible assets to their respective carrying values. We typically use an income method to estimate the fair value of these assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants, and include the amount and timing of future cash flows (including expected growth rates and profitability). Estimates utilized in the projected cash flows include consideration of macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin expansion, Company business plans, the underlying product or technology life cycles, economic barriers to entry, a brand's relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.

During fiscal 2019, we determined that the estimated fair value of our Shave Care reporting unit was less than its carrying value. Therefore, we conducted step two of the goodwill impairment test. Step two requires that we allocate the fair value of the reporting unit to identifiable assets and liabilities of the reporting unit, including previously unrecognized intangible assets. Any residual fair value after this allocation is compared to the goodwill balance and any excess goodwill is charged to expense. We also determined that the Gillette indefinite-lived intangible asset was less than its carrying amount. As a result, we recorded non-cash impairment charges for both items. As previously disclosed, the fair values of the Shave Care reporting unit and the related Gillette indefinite-lived intangible asset have been reduced in recent years, including further reductions during the year and quarter ending June 30, 2019. These reductions were due in large part to significant currency devaluations in a number of countries relative to the U.S. dollar, a deceleration of category growth

caused by changing grooming habits, primarily in the developed markets, and an increased competitive market environment in the U.S. and certain other markets, which collectively have resulted in reduced cash flow projections. A non-cash before and after-tax impairment charge of $6.8 billion was recognized to reduce the carrying amount of goodwill for the Shave Care reporting unit. Following the impairment charge, the carrying value of the Shave Care goodwill is $12.6 billion. Additionally, a non-cash, before-tax impairment charge of $1.6 billion ($1.2 billion after-tax) was recognized to reduce the carrying amount of the Gillette indefinite-lived intangible asset to its estimated fair value as of June 30, 2019. Following the impairment charge, the carrying value of the Gillette indefinite-lived intangible asset is $14.1 billion.

We believe the estimates and assumptions utilized in our impairment testing are reasonable and are comparable to those that would be used by other marketplace participants. 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 initially used to estimate fair value for purposes of establishing or subsequently impairing the carrying amount of goodwill and related intangible assets, we may need to record additional non-cash impairment charges in the future.

During fiscal 2019, the Company completed the acquisition of the over the counter (OTC) healthcare business of Merck KGaA (Merck OTC), which is included in the Health Care reportable segment (see Note 14), along with other minor acquisitions in the Beauty, the Baby, Feminine & Family Care and the Fabric & Home Care reportable segments. Goodwill increases due to acquisitions were partially offset by the divestiture of the Teva portion of the PGT business in the Health Care reportable segment and currency translation.

The change in goodwill during fiscal 2018 was primarily due to acquisitions of two brands within the Beauty reportable segment and currency translation across all reportable segments.

Identifiable intangible assets were comprised of:



	2019					2018
As of June 30	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
INTANGIBLE ASSETS WITH DETERMINABLE LIVES
Brands	$	3,836	$	(2,160	)	$	3,146	$	(2,046	)
Patents and technology	2,776		(2,434		)	2,617		(2,350		)
Customer relationships	1,787		(691		)	1,372		(616		)
Other	145		(91		)	241		(144		)
TOTAL	$	8,544	$	(5,376	)	$	7,376	$	(5,156	)

INTANGIBLE ASSETS WITH INDEFINITE LIVES
Brands	21,047		—			21,682		—
TOTAL	$	29,591	$	(5,376	)	$	29,058	$	(5,156	)

Amortization expense of intangible assets was as follows:



Years ended June 30	2019		2018		2017
Intangible asset amortization	$	349	$	302	$	325

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



Years ending June 30	2020		2021		2022		2023		2024
Estimated amortization expense	$	359	$	309	$	290	$	278	$	267