Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

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 goodwill impairment charges are as follows:

	As of June 30, 2022				As of December 31, 2021
(in millions)	Gross Carrying Amount		Accumulated Amortization/ Write-offs		Gross Carrying Amount		Accumulated Amortization/ Write-offs
Technology-related	$	12,515	$	(7,078)	$	11,957	$	(6,754)
Patents	487		(392)		494		(398)
Other intangible assets	1,953		(1,368)		1,900		(1,325)
Amortizable intangible assets	$	14,955	$	(8,838)	$	14,351	$	(8,476)
Goodwill	$	22,783	$	(9,900)	$	21,888	$	(9,900)
IPR&D	$	112			$	126
Technology-related	120				120
Indefinite-lived intangible assets	$	232			$	246

The increase in our balance of goodwill and amortizable intangible assets is primarily related to our acquisition of Baylis Medical completed in the first quarter of 2022.

The following represents our goodwill balance by global reportable segment:

(in millions)	MedSurg		Cardiovascular		Total
As of December 31, 2021	$	4,246	$	7,741	$	11,988
Impact of foreign currency fluctuations and other changes in carrying value	(5)		(88)		(93)
Goodwill acquired	—		989		989
As of June 30, 2022	$	4,241	$	8,642	$	12,883

In the first quarter of 2022, we reorganized our operational structure in order to strengthen our category leadership in the markets we serve and, in particular, benefit our Cardiology customers and patients. Following the reorganization, we have aggregated our core businesses into two reportable segments: MedSurg and Cardiovascular, each of which generates revenues from the sale of medical devices. We have revised prior periods to conform to the current year presentation.

Goodwill and Intangible Asset Impairments

We did not record any goodwill impairment charges in the first six months of 2022 or 2021. We test our goodwill balances in the second quarter of each year as of April 1 for impairment, or more frequently if impairment indicators are present or changes in circumstances suggest an impairment may exist.

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. Following the reorganization of our operational structure in the first quarter of 2022, we identified the following reporting units for purposes of our annual goodwill impairment test: Interventional Cardiology, Rhythm Management, Peripheral Interventions, Endoscopy, Urology and Pelvic Health and Neuromodulation. Based on the criteria prescribed in FASB ASC Topic 350, Intangibles - Goodwill and Other (FASB ASC Topic 350), we aggregated the Interventional Cardiology Therapies and Watchman components of our Cardiology operating segment into a

single Interventional Cardiology reporting unit, and aggregated the Cardiac Rhythm Management and Electrophysiology components into a single Rhythm Management reporting unit.

In the second quarter of 2022, we performed our annual goodwill impairment test utilizing both the qualitative and quantitative approach described in FASB ASC Topic 350. The qualitative approach was used for testing reporting units where fair value has historically exceeded carrying value by greater than 100 percent, and all other reporting units were tested using the quantitative approach. For those tested using the qualitative approach, after assessing the totality of events, it was determined that it was not more likely than not that the fair value of the reporting units was less than their carrying value, and it was not deemed necessary to proceed to the quantitative test. For all reporting units tested using the quantitative approach, we determined that the fair value of each reporting unit exceeded their carrying value and concluded that goodwill was not impaired or at risk of impairment.

We recorded Intangible asset impairment charges of $7 million in the second quarter and first six months of 2022, and $45 million in the second quarter and first six months of 2021. 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. We test our indefinite-lived intangible assets at least annually during the third quarter for impairment and reassess their classification as indefinite-lived assets. In addition, we review our indefinite-lived intangible assets for classification and impairment more frequently if impairment indicators exist. During the second quarter of 2021, we determined it was more likely than not that one of our indefinite-lived intangible assets was impaired based on our qualitative assessment of impairment indicators. We tested the intangible asset for recoverability and recorded an impairment charge associated with incremental time and cost to complete the associated in-process research and development (IPR&D) project.

Refer to Note A – Basis of Presentation to our audited financial statements contained in Item 8 of our most recent Annual Report on Form 10-K for further discussion of our annual goodwill and intangible asset impairment testing.