Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets

Goodwill and Intangible Assets

6. Goodwill and Intangible Assets

Goodwill

The changes in the carrying amount of goodwill for the years ended December 31, 2019, 2018, and 2017 are as follows:

	Europe		Americas		Other		Total
Balance as of January 1, 2017	$	808	$	1,649	$	5	$	2,462
Translation effects		105		23				128
Balance as of December 31, 2017		913		1,672		5		2,590
Translation effects		(39)		(38)				(77)
Balance as of December 31, 2018		874		1,634		5		2,513
Acquisition (divestiture) related adjustments				21		(5)		16
Impairment				(595)				(595)
Translation effects		(15)		15				—
Balance as of December 31, 2019	$	859	$	1,075	$	—	$	1,934

As part of its on-going assessment of goodwill, the Company determined that indicators of impairment had occurred during the third quarter of 2019. The triggering events were management’s update to its long-range plan, which indicated lower projected future cash flows for its North American reporting unit (in the Americas segment) as compared to the projections used in the most recent goodwill impairment test performed as of October 1, 2018, and a significant reduction in the Company’s share price. The Company’s business in North America has experienced declining shipments to its alcoholic beverage customers, primarily in the beer category, and this trend is likely to continue into the foreseeable future. These factors, combined with the narrow difference between the estimated fair value and carrying value of the North American reporting unit as of October 1, 2018, resulted in the Company performing an interim impairment analysis during the third quarter of 2019. As a result, the Company recorded a non-cash impairment charge of $595 million in the third quarter of 2019, which was equal to the excess of the North American reporting unit's carrying value over its fair value. Goodwill related to the Company’s other reporting units was determined to not be impaired as a result of the interim impairment analysis.

When performing its test for goodwill impairment in the third quarter of 2019, the Company compared the business enterprise value (“BEV”) of each reporting unit with its carrying value. The BEV was computed based on estimated future cash flows, discounted at the weighted average cost of capital of a hypothetical third-party buyer. If the BEV is less than the carrying value for any reporting unit, then any excess of the carrying value over the BEV is recorded as an impairment loss.  The calculations of the BEV are based on internal and external inputs, such as projected future cash flows of the reporting units, weighted average cost of capital, among other assumptions. The valuation approach utilized by management represents a Level 3 fair value measurement

measured on a non-recurring basis in the fair value hierarchy due to the Company’s use of unobservable inputs. The Company’s projected future cash flows incorporates management’s best estimates of the expected future results including, but not limited to, price trends, customer demand, material costs, asset replacement costs and any other known factors.  

In addition to the above, goodwill is tested for impairment annually as of October 1. During the fourth quarter of 2019, the Company completed this testing through a qualitative assessment and, after evaluating the results, events and circumstances, the Company concluded that it had sufficient evidence that it was more likely than not that the estimated fair value of each of its reporting units exceeded its carrying value. The remaining balances of goodwill, primarily the $446 million of goodwill recorded on the North American reporting unit (Americas segment), remain susceptible to future impairment charges. If the Company’s projected future cash flows were substantially lower, or if the assumed weighted average cost of capital were substantially higher, the testing performed during 2019 may have indicated an impairment in one of the Company’s other reporting units or additional impairment of the North American reporting unit’s goodwill. Any impairment charges that the Company may take in the future could be material to its consolidated results of operations and financial condition.

The acquisition-related adjustment in the Americas segment (Latin America reporting unit) in 2019 relates to the Nueva Fanal acquisition that the Company completed on June 28, 2019. See Note 21 for additional details.

Goodwill for the Asia Pacific segment is $0 and net of accumulated impairment losses of $1,135 million as of December 31, 2019, 2018, and 2017. Goodwill for the Americas segment is net of accumulated impairment losses of $595 million as of December 31, 2019.

Intangible Assets

Customer list intangible assets are amortized using the accelerated amortization method over their 20 year lives. Net intangible asset values were $371 million and $400 million, which included accumulated amortization of $183 million and $142 million, for the years ended December 31, 2019 and 2018, respectively. Amortization expense for intangible assets was $41 million, $40 million and $41 million for the years ended December 31, 2019, 2018, and 2017, respectively. Estimated amortization related to intangible assets through 2024 is as follows: 2020, $41 million; 2021, $39 million; 2022, $36 million; 2023, $32 million; and 2024, $30 million. No impairment existed on these assets at December 31, 2019.

The Company has determined that the fair value measurements related to the customer list intangibles are based on significant unobservable inputs and are classified as Level 3 in the fair value hierarchy.