Goodwill and Other Intangible Assets (Notes)

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Accounting Policy

The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. We determine the estimated fair values after review and consideration of relevant information including discounted cash flows, quoted market prices, and estimates made by management. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed, such excess is recorded as goodwill.

We perform our annual goodwill impairment assessment as of October 1. We perform this assessment more frequently if impairment indicators exist. We determine the estimated fair value of each reporting unit based on a combination of earnings before interest, taxes, depreciation and amortization (“EBITDA”), valuation multiples, and estimated future cash flows discounted at rates commensurate with the capital structure and cost of capital of comparable market participants, giving appropriate consideration to the prevailing borrowing rates within the casino industry in general. We also evaluate the aggregate fair value of all of our reporting units and other non-operating assets in comparison to our aggregate debt and equity market capitalization at the test date. EBITDA multiples and discounted cash flows are common measures used to value businesses in our industry.

We perform our annual impairment assessment of other non-amortizing intangible assets as of October 1. We perform this assessment more frequently if impairment indicators exist. We determine the estimated fair value of our non-amortizing intangible assets by primarily using the “Relief From Royalty Method” and “Excess Earnings Method” under the income approach.

The annual evaluation of goodwill and other non-amortizing intangible assets requires the use of estimates about future operating results, valuation multiples, and discount rates to determine their estimated fair value. Changes in these assumptions can materially affect these estimates. Thus, to the extent gaming volumes deteriorate further in the near future, discount rates increase significantly, or we do not meet our projected performance, we could have additional impairments to record in the future and such impairments could be material.

Balances

Changes in Carrying Value of Goodwill by Segment

(In millions)	CEOC			CERP			CGP LLC Casinos			CIE			CEC Total
Gross Goodwill
Balance as of January 1, 2013	$	5,475		$	3,894		$	—		$	65		$	9,434
Additions	—			—			—			22			22
Disposals ⁽¹⁾	(15		)	—			—			—			(15		)
Transfers ⁽²⁾	(25		)	—			25			—			—
Balance as of December 31, 2013	5,435			3,894			25			87			9,441
Accumulated Impairment
Balance as of January 1, 2013	(4,071		)	(2,203		)	—			—			(6,274		)
Impairment	(104		)	—			—			—			(104		)
Balance as of December 31, 2013	(4,175		)	(2,203		)	—			—			(6,378		)
Net Carrying Value, December 31, 2013	$	1,260		$	1,691		$	25		$	87		$	3,063

Gross Goodwill
Balance as of January 1, 2014	$	5,435		$	3,894		$	25		$	87		$	9,441
Additions	—			—			—			13			13
Transfers ⁽³⁾	(1,141		)	—			1,141			—			—
Balance as of December 31, 2014	4,294			3,894			1,166			100			9,454
Accumulated Impairment
Balance as of January 1, 2014	(4,175		)	(2,203		)	—			—			(6,378		)
Impairment ⁽⁴⁾	(251		)	(289		)	(155		)	(15		)	(710		)
Transfers ⁽³⁾	805			—			(805		)	—			—
Balance as of December 31, 2014	(3,621		)	(2,492		)	(960		)	(15		)	(7,088		)
Net Carrying Value, December 31, 2014	$	673		$	1,402		$	206		$	85		$	2,366

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⁽¹⁾	During 2013, CEOC sold 45% of its interest in Baluma S.A. (See Note 6, “Acquisitions, Dispositions, and Other Property Matters.”)


⁽²⁾	During 2013, CGP LLC purchased Planet Hollywood Hotel & Casino from CEOC (see Note 2, “Basis of Presentation and Principles of Consolidation”).


⁽³⁾	During 2014, CGP LLC purchased four properties from CEOC (see Note 2, “Basis of Presentation and Principles of Consolidation”).


⁽⁴⁾	CIE impairment during 2014 related to CIE RMG BEL, LLC is included in discontinued operations. (See Note 6, “Acquisitions, Dispositions, and Other Property Matters.”)

Changes in Carrying Value of Intangible Assets Other Than Goodwill

	Amortizing						Non-Amortizing						Total
(In millions)	2014			2013			2014			2013			2014			2013
Balance as of January 1	$	730		$	1,028		$	2,758		$	2,958		$	3,488		$	3,986
Additions⁽¹⁾	50			19			—			—			50			19
Impairments	(2		)	(150		)	(240		)	(200		)	(242		)	(350		)
Amortization expense	(133		)	(165		)	—			—			(133		)	(165		)
Other	(9		)	(2		)	(4		)	—			(13		)	(2		)
Balance as of December 31	$	636		$	730		$	2,514		$	2,758		$	3,150		$	3,488

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⁽¹⁾	During 2014, we increased our amortizing intangible assets $50 million, primarily as a result of the Pacific Interactive acquisition (see Note 6, “Acquisitions, Dispositions, and Other Property Matters”). During 2013, we increased our amortizing intangible assets $19 million as a result of entering into certain contractual arrangements.

During 2014, a decline in recent performance and downward adjustments to expectations of future performance in certain of our markets resulted in the impairment charges shown below related to goodwill, trademarks, and gaming rights. We are not able to finalize our impairment assessment related to the goodwill of certain properties that had a triggering event in the fourth quarter. We expect to complete the remaining fair value determination during the first quarter of 2015, at which time we will record any additional impairments, if deemed necessary.

Intangible Asset Impairment Charges - Continuing Operations

	Years Ended December 31,
(In millions)	2014		2013		2012
Goodwill ⁽¹⁾	$	695	$	104	$	195
Trademarks	13		101		209
Gaming Rights and other ⁽²⁾	226		245		33
Total impairment charges	$	934	$	450	$	437

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⁽¹⁾	Includes $406 million of impairments recorded in the fourth quarter of 2014.


⁽²⁾	Includes $40 million of impairments recorded in the fourth quarter of 2014.

Gross Carrying Value and Accumulated Amortization of Intangible Assets Other Than Goodwill

	December 31, 2014								December 31, 2013
(Dollars in millions)	Weighted Average Remaining Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortizing intangible assets
Customer relationships	6.2	$	1,265	$	(736	)	$	529	$	1,268	$	(646	)	$	622
Contract rights	2.1	84		(81		)	3		98		(79		)	19
Patented technology	2.4	188		(109		)	79		138		(77		)	61
Gaming rights and other	9.6	47		(22		)	25		43		(15		)	28
		$	1,584	$	(948	)	636		$	1,547	$	(817	)	730
Non-amortizing intangible assets
Trademarks							1,580							1,598
Gaming rights							934							1,160
							2,514							2,758
Total intangible assets other than goodwill							$	3,150						$	3,488

The aggregate amortization expense for intangible assets that continue to be amortized was $133 million in 2014, $163 million in 2013, and $173 million in 2012. Estimated annual amortization expense for each of the five years from 2015 through 2019 is $130 million, $111 million, $101 million, $87 million, and $68 million, respectively.

- 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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