Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE C – GOODWILL AND OTHER INTANGIBLE ASSETS

The gross carrying amount of goodwill and other intangible assets and the related accumulated amortization for intangible assets subject to amortization and accumulated write-offs of goodwill as of June 30, 2017 and December 31, 2016 are as follows:



	As of
	June 30, 2017					December 31, 2016
	Gross Carrying		Accumulated Amortization/			Gross Carrying		Accumulated Amortization/
(in millions)	Amount		Write-offs			Amount		Write-offs
Amortizable intangible assets
Technology-related	$	9,390	$	(4,675	)	$	9,123	$	(4,468	)
Patents	511		(370		)	529		(374		)
Other intangible assets	1,632		(779		)	1,583		(722		)
	$	11,533	$	(5,824	)	$	11,235	$	(5,564	)
Unamortizable intangible assets
Goodwill	$	16,771	$	(9,900	)	$	16,578	$	(9,900	)
In-process research and development (IPR&D)	92		—			92		—
Technology-related	120		—			120		—
	$	16,983	$	(9,900	)	$	16,790	$	(9,900	)

Our technology-related intangible assets that are not subject to amortization represent technical processes, intellectual property and/or institutional understanding acquired through business combinations that are fundamental to the on-going operations of our business and have no limit to their useful life. Our technology-related intangible assets that are not subject to amortization are comprised primarily of certain acquired balloon and other technology, which is foundational to our continuing operations within the Cardiovascular market and other markets within interventional medicine. We assess our indefinite-lived intangible assets at least annually for impairment and reassess their classification as indefinite-lived assets. We assess qualitative factors to determine whether the existence of events and circumstances indicate that it is more likely than not that our indefinite-lived intangible assets are impaired. If we conclude that it is more likely than not that the asset is impaired, we then determine the fair value of the intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying value in accordance with FASB ASC Topic 350, Intangibles - Goodwill and Other.

The following represents our goodwill balance by global reportable segment:



(in millions)	Cardiovascular		Rhythm Management		MedSurg		Total
Balance as of December 31, 2016	$	3,513	$	290	$	2,875	$	6,678
Impact of foreign currency fluctuations and other changes in carrying amount	4		1		3		8
Goodwill acquired	185		—		—		185
Balance as of June 30, 2017	$	3,702	$	291	$	2,878	$	6,871

Goodwill Impairment Testing

In the second quarter of 2017, we performed our annual goodwill impairment test for all of our reporting units and concluded the fair value of each reporting unit exceeded its carrying value. Based on the criteria prescribed in FASB ASC Topic 350, we assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. For our 2017 and 2016 annual impairment assessment, we identified seven reporting units: Interventional Cardiology, Peripheral Interventions, Cardiac Rhythm Management, Electrophysiology, Endoscopy, Urology and Pelvic Health and Neuromodulation. We aggregated the Cardiac Rhythm Management and Electrophysiology reporting units, components of the Rhythm Management operating segment, based on the criteria prescribed in FASB ASC Topic 350. These reporting units were aggregated due to a reorganization that commenced in 2015 that resulted in integrated leadership, shared resources and consolidation of certain sites in 2016.

In performing the goodwill impairment assessment, we utilized both the optional qualitative assessment and the quantitative approach prescribed under FASB ASC Topic 350. The qualitative assessment was used for testing certain reporting units where fair value has historically exceeded carrying value by greater than 100 percent. All other reporting units were tested using the quantitative approach. After assessing the totality of events, if it is determined that it is not more likely than not that the fair value of the reporting unit is less than its carrying value, the quantitative approach of the goodwill impairment test is unnecessary. In 2017, for all reporting units tested using the optional qualitative assessment, we concluded that it was not necessary to perform the quantitative impairment test. For all reporting units tested using the quantitative approach, we concluded that the fair value of each reporting unit exceeded its carrying value. Refer to Critical Accounting Policies and Estimates within Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Item 2 of this Quarterly Report on Form 10-Q for further discussion of our annual goodwill impairment testing.

The following is a rollforward of accumulated goodwill write-offs by global reportable segment:



(in millions)	Cardiovascular			Rhythm Management			MedSurg			Total
Accumulated write-offs as of December 31, 2016	$	(1,479	)	$	(6,960	)	$	(1,461	)	$	(9,900	)
Goodwill written off	—			—			—			—
Accumulated write-offs as of June 30, 2017	$	(1,479	)	$	(6,960	)	$	(1,461	)	$	(9,900	)

- 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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