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Other Assets
 9 Months Ended
Sep. 30, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Other Assets
Note 12.
Other Assets
The table below presents other assets by type.
 
    As of  
$ in millions
  
 
September
2020
 
 
    
December
2019
  
 
Property, leasehold improvements and equipment
  
 
$23,515
 
     $21,886  
Goodwill and identifiable intangible assets
  
 
4,965
 
     4,837  
Operating lease
right-of-use
assets
  
 
2,268
 
     2,360  
Income
tax-related
assets
  
 
2,543
 
     2,068  
Miscellaneous receivables and other
  
 
4,683
 
     3,731  
Total
  
 
$37,974
 
     $34,882  
Property, Leasehold Improvements and Equipment
Property, leasehold improvements and equipment is net of accumulated depreciation and amortization of $10.04 billion as of September 2020 and $9.95 billion as of December 2019. Property, leasehold improvements and equipment included $6.49 billion as of September 2020 and $6.16 billion as of December 2019 that the firm uses in connection with its operations, and $346 million as of September 2020 and $521 million as of December 2019 of foreclosed real estate primarily related to distressed loans that were purchased by the firm. The remainder is held by investment entities, including VIEs, consolidated by the firm. Substantially all property and equipment is depreciated on a straight-line basis over the useful life of the asset. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvement or the term of the lease. Capitalized costs of software developed or obtained for internal use are amortized on a straight-line basis over three years.
The firm tests property, leasehold improvements and equipment for impairment whenever events or changes in circumstances suggest that an asset’s or asset group’s carrying value may not be fully recoverable. To the extent the carrying value of an asset or asset group exceeds the projected undiscounted cash flows expected to result from the use and eventual disposal of the asset or asset group, the firm determines the asset or asset group is impaired and records an impairment equal to the difference between the estimated fair value and the carrying value of the asset or asset group. In addition, the firm will recognize an impairment prior to the sale of an asset or asset group if the carrying value of the asset or asset group exceeds its estimated fair value.
There were no material impairments during the three months ended September 2020 and there were $132 million of impairments during the nine months ended September 2020. There were no material impairments during both the three and nine months ended September 2019.
Goodwill and Identifiable Intangible Assets
Goodwill.
Goodwill is the cost of acquired companies in excess of the fair value of net assets, including identifiable intangible assets, at the acquisition date.
The table below presents the carrying value of goodwill by reporting unit.
 
    As of  
$ in millions
  
 
September
2020
 
 
      December
2019		  
 
Investment Banking
  
 
$  
 
281
 
      $   281  
Global Markets:
     
FICC
  
 
269
 
      269  
Equities
  
 
2,645
 
      2,508  
Asset Management
  
 
390
 
      390  
Consumer & Wealth Management:
     
Consumer banking
  
 
48
 
      48  
Wealth management
  
 
700
 
      700  
Total
  
 
$4,333
 
      $4,196  
In the table above, the increase in goodwill in Equities from December 2019 to September 2020 reflects the acquisition of Folio Financial, Inc. in September 2020.
Goodwill is assessed for impairment annually in the fourth quarter or more frequently if events occur or circumstances change that indicate an impairment may exist. When assessing goodwill for impairment, first, a qualitative assessment can be made to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than its estimated carrying value. If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed. Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.
The quantitative goodwill test compares the estimated fair value of each reporting unit with its estimated net book value (including goodwill and identifiable intangible assets). If the reporting unit’s estimated fair value exceeds its estimated net book value, goodwill is not impaired. An impairment is recognized if the estimated fair value of a reporting unit is less than its estimated net book value.
To estimate the fair value of each reporting unit, other than Consumer banking, a relative value technique is used because the firm believes market participants would use this technique to value these reporting units. The relative value technique applies observable
price-to-earnings
multiples or
price-to-book
multiples of comparable competitors to reporting units’ net earnings or net book value. To estimate the fair value of Consumer banking, a discounted cash flow valuation approach is used because the firm believes market participants would use this technique to value that reporting unit given its early stage of development. The estimated net carrying value of each reporting unit reflects an allocation of total shareholders’ equity and represents the estimated amount of total shareholders’ equity required to support the activities of the reporting unit under currently applicable regulatory capital requirements.
In the fourth quarter of 2019, goodwill was tested for impairment using a quantitative test. The estimated fair value of each of the reporting units exceeded its respective net carrying value, and therefore goodwill was not impaired.
During the first half of 2020, the outbreak of the
COVID-19
pandemic broadly impacted the operating environment. Uncertainty about the
COVID-19
pandemic and its continued impact persisted throughout the third quarter of 2020. However, the operating environment continued to recover from the earlier declines in economic and market conditions. Multiple factors, including performance indicators, firm and industry events, macroeconomic indicators and fair value indicators, were qualitatively assessed in the third quarter of 2020 with respect to each of the firm’s reporting units to determine whether it was more likely than not that the estimated fair value of any of these reporting units was less than its estimated carrying value. The qualitative assessment also considered changes since the quantitative test performed in the fourth quarter of 2019. Net revenues for the third quarter of 2020 were strong across the firm’s business segments and their respective reporting units, reflecting the improvement in the operating environment. Based on the qualitative assessment, the firm determined that it was more likely than not that the estimated fair value of each of the reporting units exceeded its respective estimated carrying value, and that the impact of the
COVID-19
pandemic through the end of the third quarter of 2020 was not a triggering event to perform a quantitative test.
Identifiable Intangible Assets.
The table below presents identifiable intangible assets by reporting unit and type.
 
    As of  
$ in millions
  
 
September
2020
 
 
     
 December
2019
  
 
By Reporting Unit
     
Global Markets:
     
FICC
  
 
$   
 
    2
 
      $        3  
Equities
  
 
46
 
      –  
Asset Management
  
 
264
 
      265  
Consumer & Wealth Management:
     
Consumer banking
  
 
6
 
      7  
Wealth management
  
 
314
 
      366  
Total
  
 
$   
 
632
 
      $    641  
 
By Type
     
Customer lists
     
Gross carrying value
  
 
$ 1,478
 
      $ 1,427  
Accumulated amortization
  
 
(1,078
) 
      (1,044 ) 
Net carrying value
  
 
400
 
      383  
 
Acquired leases and other
     
Gross carrying value
  
 
685
 
      790  
Accumulated amortization
  
 
(453
) 
      (532 ) 
Net carrying value
  
 
232
 
      258  
 
Total gross carrying value
  
 
2,163
 
      2,217  
Total accumulated amortization
  
 
(1,531
) 
      (1,576 ) 
Total net carrying value
  
 
$   
 
632
 
      $    641  
The firm acquired $125 million of intangible assets during the nine months ended September 2020, primarily related to acquired leases and customer lists, with a weighted average amortization period of 11 years. The firm acquired $515 million of intangible assets during 2019, primarily related to customer lists, with a weighted average amortization period of 10 years.
Substantially all of the firm’s identifiable intangible assets have finite useful lives and are amortized over their estimated useful lives generally using the straight-line method.
The tables below present information about the amortization of identifiable intangible assets.
 
   
Three Months
Ended September
    
        
  
Nine Months
Ended September
  
$ in millions
  
 
2020
 
        2019    
 
  
 
2020
 
        2019  
Amortization
  
 
$40
 
        $52    
 
  
 
$117
 
        $134  
 
$ in millions
  
 
As of
September 2020
 
 
Estimated future amortization
  
Remainder of 2020
  
 
$  30
 
2021
  
 
$105
 
2022
  
 
$  88
 
2023
  
 
$  80
 
2024
  
 
$  64
 
2025
  
 
$  45
 
The firm tests intangible assets for impairment whenever events or changes in circumstances suggest that an asset’s or asset group’s carrying value may not be fully recoverable. To the extent the carrying value of an asset or asset group exceeds the projected undiscounted cash flows expected to result from the use and eventual disposal of the asset or asset group, the firm determines the asset or asset group is impaired and records an impairment equal to the difference between the estimated fair value and the carrying value of the asset or asset group. In addition, the firm will recognize an impairment prior to the sale of an asset or asset group if the carrying value of the asset or asset group exceeds its estimated fair value. There were no material impairments during each of the three and nine months ended September 2020 and September 2019.
Operating Lease
Right-of-Use
Assets
The firm enters into operating leases for real estate, office equipment and other assets, substantially all of which are used in connection with its operations. For leases longer than one year, the firm recognizes a
right-of-use
asset representing the right to use the underlying asset for the lease term, and a lease liability representing the liability to make payments. The lease term is generally determined based on the contractual maturity of the lease. For leases where the firm has the option to terminate or extend the lease, an assessment of the likelihood of exercising the option is incorporated into the determination of the lease term. Such assessment is initially performed at the inception of the lease and is updated if events occur that impact the original assessment.
An operating lease
right-of-use
asset is initially determined
based
on the operating lease liability, adjusted for initial direct costs, lease incentives and amounts paid at or prior to lease commencement. This amount is then amortized over the lease term. The firm recognized $152 million for the nine months ended September 2020 and $885 million (primarily related to the firm’s new European headquarters in London) for the nine months ended September 2019 of
right-of-use
assets and operating lease liabilities in
non-cash
transactions for leases entered into or assumed. See Note 15 for information about operating lease liabilities.
For leases where the firm will derive no economic benefit from leased space that it has vacated or where the firm has shortened the term of a lease when space is no longer needed, the firm will record an impairment or accelerated amortization of
right-of-use
assets. There were no material impairments or accelerated amortizations during both the nine months ended September 2020 and September 2019.
Miscellaneous Receivables and Other
Miscellaneous receivables and other included:
 
•  
Investments in qualified affordable housing projects of $684 million as of September 2020 and $606 million as of December 2019.
 
•  
Assets classified as held for sale of $1.33 billion as of September 2020 and $470 million as of December 2019 related to the firm’s consolidated investments within the Asset Management segment, substantially all of which consisted of property and equipment.