Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 7—GOODWILL AND INTANGIBLE ASSETS

The table below displays the components of goodwill, intangible assets and MSRs as of December 31, 2016 and 2015. Goodwill is presented separately on our consolidated balance sheets. Intangible assets and MSRs are included in other assets on our consolidated balance sheets.

Table 7.1: Components of Goodwill, Intangible Assets and MSRs



	December 31, 2016
(Dollars in millions)	Carrying Amount of Assets⁽¹⁾		Accumulated Amortization⁽¹⁾			Net Carrying Amount		Remaining Amortization Period
Goodwill	$	14,519	N/A			$	14,519	N/A
Intangible assets:
Purchased credit card relationship (“PCCR”) intangibles	2,151		$	(1,715	)	436		4.4 years
Core deposit intangibles	1,391		(1,345		)	46		2.0 years
Other⁽²⁾	314		(131		)	183		8.7 years
Total intangible assets	3,856		(3,191		)	665		5.4 years
Total goodwill and intangible assets	$	18,375	$	(3,191	)	$	15,184
MSRs:
Consumer MSRs⁽³⁾	$	80	N/A			$	80
Commercial MSRs⁽⁴⁾	276		$	(82	)	194
Total MSRs	$	356	$	(82	)	$	274

	December 31, 2015
(Dollars in millions)	Carrying Amount of Assets⁽¹⁾		Accumulated Amortization⁽¹⁾			Net Carrying Amount		Remaining Amortization Period
Goodwill	$	14,480	N/A			$	14,480	N/A
Intangible assets:
PCCR intangibles	2,156		$	(1,467	)	689		5.1 years
Core deposit intangibles	1,771		(1,662		)	109		2.9 years
Other⁽²⁾	378		(135		)	243		9.6 years
Total intangible assets	4,305		(3,264		)	1,041		5.9 years
Total goodwill and intangible assets	$	18,785	$	(3,264	)	$	15,521
MSRs:
Consumer MSRs⁽³⁾	$	68	N/A			$	68
Commercial MSRs⁽⁴⁾	212		$	(51	)	161
Total MSRs	$	280	$	(51	)	$	229

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⁽¹⁾	Certain intangible assets that were fully amortized in prior periods were removed from our consolidated balance sheets.


⁽²⁾	Primarily consists of intangibles for sponsorship relationships, brokerage relationship intangibles, partnership and other contract intangibles and trade name intangibles.


⁽³⁾	Represents MSRs related to our Consumer Banking business that are carried at fair value on our consolidated balance sheets.


⁽⁴⁾	Represents MSRs related to our Commercial Banking business that are subsequently accounted for under the amortization method and periodically assessed for impairment. We recorded $31 million and $27 million of amortization expense for the years ended December 31, 2016 and 2015, respectively.

Goodwill

The following table presents goodwill attributable to each of our business segments as of December 31, 2016 and 2015.

Table 7.2: Goodwill Attributable to Business Segments



(Dollars in millions)	Credit Card			Consumer Banking		Commercial Banking			Total
Balance as of December 31, 2014	$	5,001		$	4,593	$	4,384		$	13,978
Acquisitions⁽¹⁾	1			7		500			508
Other adjustments	(5		)	0		(1		)	(6		)
Balance as of December 31, 2015	$	4,997		$	4,600	$	4,883		$	14,480
Acquisitions⁽¹⁾	36			0		18			54
Other adjustments	(15		)	0		0			(15		)
Balance as of December 31, 2016	$	5,018		$	4,600	$	4,901		$	14,519

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⁽¹⁾	In connection with the HFS acquisition, we recorded goodwill of $518 million representing the amount by which the purchase price exceeded the fair value of the net assets acquired. The goodwill was assigned to the Commercial Banking segment.

We did not recognize any goodwill impairment during 2016, 2015 or 2014. The goodwill impairment test, performed as of October 1 of each year, is a two-step test. The first step identifies whether there is potential impairment by comparing the fair value of a reporting unit to its carrying amount, including goodwill. If the fair value of a reporting unit is less than its carrying amount, the second step of the impairment test is required to measure the amount of any potential impairment loss.

The fair value of reporting units is calculated using a discounted cash flow methodology, a form of the income approach. The calculation uses projected cash flows based on each reporting unit’s internal forecast and uses the perpetuity growth method to calculate terminal values. These cash flows and terminal values are then discounted using appropriate discount rates, which are largely based on our external cost of equity with adjustments for risk inherent in each reporting unit. Cash flows are adjusted, as necessary, in order to maintain each reporting unit’s equity capital requirements. Our discounted cash flow analysis requires management to make judgments about future loan and deposit growth, revenue growth, credit losses, and capital rates. Discount rates used in 2016 for the reporting units ranged from 8% to 13%. The key inputs into the discounted cash flow analysis were consistent with market data, where available, indicating that assumptions used were within a reasonable range of observable market data. For our 2016 goodwill impairment test for our International Card reporting unit, we engaged an independent valuation specialist to assist in the determination of the International Card reporting unit fair value. We employed both a discounted cash flow and market approach to calculate the fair value of our International Card reporting unit. Based on our analysis, fair value exceeded the carrying amount for all reporting units as of our annual testing date; therefore, the second step of impairment testing was unnecessary.

Intangible Assets

In connection with our acquisitions, we recorded intangible assets which include purchased credit card relationship (“PCCR”) intangibles, core deposit intangibles, brokerage relationship intangibles, partnership contract intangibles, other contract intangibles, trademark intangibles and other intangibles, which are subject to amortization. At acquisition, the PCCR intangibles reflect the estimated value of existing credit card holder relationships and the core deposit intangibles reflect the estimated value of deposit relationships. During 2016, we recorded an impairment charge of $17 million related primarily to our brokerage relationship intangibles. There were no meaningful intangible asset impairments in 2015 or 2014.

Intangible assets are typically amortized over their respective estimated useful lives on either an accelerated or straight-line basis. The following table summarizes the actual amortization expense recorded for the years ended December 31, 2016, 2015 and 2014 and the estimated future amortization expense for intangible assets as of December 31, 2016:

Table 7.3: Amortization Expense



(Dollars in millions)	Amortization Expense
Actual for the year ended December 31,
2014	$	532
2015	430
2016	386
Estimated future amounts for the year ended December 31,
2017	245
2018	176
2019	108
2020	57
2021	27
Thereafter	48
Total estimated future amounts	$	661

- 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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