Goodwill

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL

6. GOODWILL

The table below details changes in the goodwill balance:

$ in millions	Net Book Value
January 1, 2020	8,509.4
Business combinations	288.1
Foreign exchange and other	(253.4	)
March 31, 2020	8,544.1
January 1, 2019	7,157.1
Business combinations	1,229.1
Foreign exchange and other	123.2
December 31, 2019	8,509.4

The 2020 additions to goodwill of $288.1 million related primarily to adjustments to the preliminary purchase price allocation of the Oppenheimer acquisition. See Note 2, "Business Combinations" and Note 15, "Commitments and Contingencies" for additional details. The 2019 addition to goodwill consists of the initial preliminary valuation of the Oppenheimer acquisition and other additions related to the preliminary valuations of acquired digital wealth technology companies.

The 2019 annual impairment review determined that no impairment existed at the annual review dates. Due to the decline in our assets under management in the three months ended March 31, 2020, management determined that an interim impairment test was necessary as of March 31, 2020.

The impairment analysis involves determining whether the estimated fair value of the company (a single reporting unit) exceeds its book value. If the fair value of the company exceeds its book value, then goodwill is not impaired. However, if the book value exceeds the fair value of the company, the amount of impairment would equal the excess book value.

The principal method of determining fair value of the company is an income approach where estimated future cash flows are discounted to arrive at a single present value amount. The discount rate used is derived based on the time value of money and the risk profile of the stream of future cash flows. Recent results and projections based on expectations regarding revenue, expenses, capital expenditure and acquisition earn out payments produce a present value for the company, or its fair value.

The company’s impairment analysis at March 31, 2020 incorporated revised forecasts that took into account the market disruptions during the quarter and expectations for a continued strain on results over the remainder of the year. Given the significant level of uncertainty that currently exists, management also considered several alternative scenarios for market and company performance over the next several years. Other key assumptions were updated as appropriate, including the discount rate, which increased as a result of an increase in the equity risk premium, which was partially offset by a decrease in the risk free rate.

The analysis resulted in no impairment because fair value of the company exceeded book value, although the amount of excess has decreased significantly since the last quantitative test. To the extent that markets remain depressed for a prolonged period of time and market conditions stagnate or worsen as a result of the COVID-19 pandemic, our assets under management, revenues, and profitability would likely be adversely affected. As a result, subsequent impairment tests may be based upon different assumptions and future cash flow projections, which may result in an impairment of goodwill. Any impairment could reduce materially the recorded amount of goodwill with a corresponding charge to our earnings.