Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2019

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 are as follows:



	As of September 30, 2019					As of December 31, 2018
(in millions)	Gross Carrying Amount		Accumulated Amortization/ Write-offs			Gross Carrying Amount		Accumulated Amortization/ Write-offs
Amortizable intangible assets
Technology-related	$	12,018	$	(5,545	)	$	10,197	$	(5,266	)
Patents	524		(404		)	520		(393		)
Other intangible assets	1,748		(1,047		)	1,666		(958		)
	$	14,290	$	(6,996	)	$	12,383	$	(6,617	)
Indefinite-lived intangible assets
Goodwill	$	19,915	$	(9,900	)	$	17,811	$	(9,900	)
IPR&D	661		—			486		—
Technology-related	120		—			120		—
	$	20,695	$	(9,900	)	$	18,417	$	(9,900	)

The following represents our goodwill balance allocated to our global reportable segments and unallocated amounts:



(in millions)	MedSurg			Rhythm and Neuro		Cardiovascular			BTG Acquisition⁽¹⁾		Total
As of December 31, 2018	$	2,063		$	1,924	$	3,925		$	—	$	7,911
Impact of foreign currency fluctuations and other changes in carrying amount	(3		)	—		2			1		(1		)
Goodwill acquired	—			268		307			1,549		2,124
Goodwill divested	—			—		(19		)	—		(19		)
As of September 30, 2019	$	2,060		$	2,191	$	4,214		$	1,550	$	10,015

(1)

As a result of the BTG Acquisition, we recognized goodwill attributable to the synergies expected to arise from the BTG Acquisition and revenue and cash flow projections associated with future technologies. The goodwill is not deductible for tax purposes. As of September 30, 2019, given the preliminary nature of the BTG Acquisition purchase price allocation, we have not yet allocated goodwill to the relevant reporting units and/or reportable segments.

Goodwill and Indefinite-Lived Intangible Asset Impairment Testing

We did not have any goodwill impairments in the third quarter and first nine months of 2019 or 2018.

We test our goodwill balances in the second quarter of each year for impairment, or more frequently if impairment indicators are present or changes in circumstances suggest an impairment may exist. In the second quarter of 2019, we performed our annual goodwill impairment test for all of our reporting units and concluded that the fair value of each reporting unit exceeded its carrying value.

In performing the goodwill impairment assessment, we utilized both the optional qualitative assessment and the quantitative approach prescribed under FASB ASC Topic 350, Intangibles - Goodwill and Other. In 2019, we performed a qualitative assessment for our Urology and Pelvic Health, Neuromodulation and Endoscopy reporting units since their fair values have exceeded carrying value by greater than 100 percent. The remaining reporting units were quantitatively tested for impairment. For the reporting units subject to a qualitative assessment, if it is determined that it is 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 necessary. In 2019, for all reporting units tested using the qualitative assessment, we concluded that it was unnecessary 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.

We did not have any Intangible asset impairment charges in the third quarter of 2019 or 2018. We recorded immaterial Intangible asset impairment charges in the first nine months of 2019 and 2018.

We review intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. If we determine it is more likely than not that the asset is impaired based on our qualitative assessment of impairment indicators, we test the intangible asset for recoverability. If the carrying value of the intangible asset or asset group exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset or asset group, we will write the carrying value down to fair value in the period impairment is identified.

In the third quarter of 2019, we performed our annual impairment test of all IPR&D projects and our indefinite-lived core technology assets using the optional qualitative assessment approach and determined that the assets were not impaired. We also verified that the classification of IPR&D projects and our indefinite-lived core technology assets we continue to recognize on our unaudited condensed consolidated balance sheets as indefinite-lived assets continues to be appropriate.

Refer to Critical Accounting Policies and Estimates within Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our most recent Annual Report on Form 10-K for further discussion of our annual goodwill and intangible asset impairment testing.