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Goodwill and Intangible Assets
 12 Months Ended
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets GOODWILL AND INTANGIBLE ASSETS
GOODWILL
The changes in the carrying value of goodwill are detailed below by segment:
 
Oilfield Services
Oilfield Equipment
Turbo-machinery & Process Solutions
Digital Solutions
Total
Balance at December 31, 2017, gross
$
15,565

$
3,901

$
1,906

$
2,036

$
23,408

Accumulated impairment at December 31, 2017
(2,633
)
(867
)
—

(254
)
(3,754
)
Balance at December 31, 2017
12,932

3,034

1,906

1,782

19,654

Purchase accounting adjustments (1)
(157
)
293

394

429

959

Currency exchange and others
(26
)
(17
)
(114
)
(33
)
(190
)
Balance at December 31, 2018
12,749

3,310

2,186

2,178

20,423

Currency exchange and others
—

9

(15
)
(21
)
(27
)
Balance at December 31, 2019
$
12,749

$
3,319

$
2,171

$
2,157

$
20,396

(1) 
Includes goodwill associated with the acquisition of BHI. The final determination of fair value of the assets and liabilities and the related goodwill associated with the acquisition of BHI was concluded in the second quarter of 2018. Of the total goodwill of $13,669 million resulting from the acquisition of BHI, $12,604 million is allocated to our Oilfield Services segment and the remainder to our other segments based on the expected benefit from the synergies of the acquisition.
During the third quarter of each fiscal year, in conjunction with our annual strategic planning process, we perform a quantitative goodwill impairment test for each of our reporting units. Our reporting units are the same as our four reportable segments. In performing this quantitative assessment, we determine fair value of each of our reporting units using a combination of the income approach and market approach by assessing each of these valuation methodologies based upon availability and relevance of comparable company data and determining appropriate weighting.
Under the income approach, the fair value for each of our reporting units was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We used our internal forecasts to estimate future cash flows, including an estimate of long-term future growth rates, based on our most recent views of the long-term outlook for each reporting unit, which includes assumptions about future commodity pricing and expected demand for our goods and services. Due to the inherent uncertainties involved in making estimates and assumptions, actual results may differ from those assumed in our forecasts.
We derived our discount rates using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing. We used discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in our internally developed forecasts. Discount rates used in our reporting unit valuations ranged from 10.0% to 11.5% as of our testing date and these rates may change in future periods based on changes in the U.S. Treasury rate, inflation or other factors.
Valuations using the market approach were derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses was based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services.
After quantifying the fair value, the carrying value of each reporting unit is then compared to its fair value and if the carrying value is more than its fair value, a step two analysis is performed. In the step two analysis, the amount of goodwill impairment, if any, is derived by deducting the fair value of the reporting unit’s assets and liabilities from the fair value of its equity, and comparing that amount with the carrying amount of goodwill.
We completed our annual impairment test of goodwill as of July 1, 2019 for all four of our reporting units.  The step one impairment test performed included key assumptions related to macroeconomic and industry conditions, overall financial performance of the reporting unit, short and long-term forecasts, the impact, if any, of the separation from GE, among other factors, all of which require considerable judgment. In addition, we also considered the declines in the market capitalization of Baker Hughes below its book value including the magnitude and duration of those declines.
Based on the results of our step one testing, the fair values of each of the four reporting units exceeded their carrying values; therefore, the second step of the impairment test was not required to be performed for any of our reporting units and no goodwill impairment was recognized.  The Turbomachinery & Process Solutions and Digital Solutions reporting units had fair values that were substantially in excess of their carrying values. The Oilfield Services (OFS) and Oilfield Equipment (OFE) reporting units had fair values that exceeded their carrying values by 8.0% and 10.0%, respectively. As part of our annual impairment test of goodwill, we performed sensitivity analyses for two key assumptions, discount rate and long-term growth rate for the OFS and OFE reporting units. We assumed a hypothetical 100-basis-point decrease in the expected long-term growth rate or a hypothetical 100-basis-point increase in the discount rate. Both scenarios independently yielded an estimated fair value for both the OFS and OFE reporting units below their carrying value.
In addition to our annual impairment testing, we also test goodwill for impairment between annual impairment testing dates whenever events or circumstances occur that, in our judgment, could more likely than not reduce the fair value of one or more reporting units below its carrying amount. In assessing the possibility that a reporting unit’s fair value has been reduced below its carrying amount due to the occurrence of events or circumstances between annual impairment testing dates, we consider all available evidence, including, but not limited to, (i) the results of our most recent annual impairment testing, in particular the magnitude of the excess of fair value over carrying value observed, (ii) downward revisions to internal forecasts, and the magnitude thereof, if any, (iii) any negative impact as a result of any additional secondary offerings of Baker Hughes' Class A common stock by GE (iv) declines in Baker Hughes market capitalization below its book value, and the magnitude and duration of those declines, if any. Between July 1, 2019 and December 31, 2019, we have not identified any events or circumstances that could more likely than not reduce the fair value of one or more of our reporting units below its carrying amount.
As of December 31, 2019, the OFS and OFE reporting units remain at-risk for future goodwill impairments as it is reasonably possible that judgments and estimates of certain key assumptions could change in future periods and may result in a reduction in fair value. Any significant adverse changes in future periods to our internal forecasts or the external market conditions, if any, could reasonably be expected to negatively affect our key assumptions and may result in future goodwill impairment charges which could be material.
Baker Hughes' stock price has historically experienced volatility as a result of industry-wide and macroeconomic factors, including global oil prices. In addition, more recently, we believe that Baker Hughes' stock price has been subject to increased volatility resulting from, among other things, uncertainty around the impact of any additional secondary offerings of Baker Hughes' Class A common stock by GE. While we believe that Baker Hughes' stock price reflects transitory circumstances/conditions as described above, any future sustained declines in its stock price could be a triggering event which may require us to perform a quantitative test at that time.
OTHER INTANGIBLE ASSETS
Intangible assets are comprised of the following at December 31:
 
2019
2018
 
Gross
Carrying
Amount
Accumulated
Amortization
Net
Gross
Carrying
Amount
Accumulated
Amortization
Net
Technology
$
1,075

$
(626
)
$
449

$
1,107

$
(526
)
$
581

Customer relationships
3,027

(1,045
)
1,982

3,085

(944
)
2,141

Capitalized software
1,193

(928
)
265

1,118

(824
)
294

Trade names and trademarks
696

(254
)
442

698

(229
)
469

Other
3

(2
)
1

14

(2
)
12

Finite-lived intangible assets
5,994

(2,855
)
3,139

6,022

(2,525
)
3,497

Indefinite-lived intangible assets (1)
2,242

—

2,242

2,222

—

2,222

Total intangible assets
$
8,236

$
(2,855
)
$
5,381

$
8,244

$
(2,525
)
$
5,719

(1) 
Indefinite-lived intangible assets are principally comprised of the Baker Hughes trade name.
Intangible assets are generally amortized on a straight-line basis with estimated useful lives ranging from one to 30 years. Amortization expense for the years ended December 31, 2019, 2018 and 2017 was $365 million, $455 million and $387 million, respectively.
Estimated amortization expense for each of the subsequent five fiscal years is expected to be as follows:
Year
Estimated Amortization Expense
2020
$
335

2021
287

2022
243

2023
226

2024
216