Acquisitions, Dispositions, Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2016

Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]

Acquisitions, Dispositions, Goodwill and Other Intangible Assets [Text Block]

Acquisitions, Dispositions, Goodwill and Other Intangible Assets

Business Acquisitions and Dispositions. During the nine months ended September 30, 2016, our investment in business acquisitions was $537 million, including debt assumed of $2 million, and consisted of the acquisition of a majority interest in an Italian heating products and services company by UTC Climate, Controls & Security and a number of small acquisitions, primarily in our commercial businesses.

Goodwill. Changes in our goodwill balances for the nine months ended September 30, 2016 were as follows:

(Dollars in millions)	Balance as of January 1, 2016		Goodwill  Resulting from Business Combinations		Foreign Currency Translation and Other			Balance as of September 30, 2016
Otis	$	1,566	$	19	$	49		$	1,634
UTC Climate, Controls & Security	9,458		450		(208		)	9,700
Pratt & Whitney	1,515		—		(4		)	1,511
UTC Aerospace Systems	14,759		25		(210		)	14,574
Total Segments	27,298		494		(373		)	27,419
Eliminations and other	3		—		—			3
Total	$	27,301	$	494	$	(373	)	$	27,422

Intangible Assets. Identifiable intangible assets are comprised of the following:

	September 30, 2016					December 31, 2015
(Dollars in millions)	Gross Amount		Accumulated Amortization			Gross Amount		Accumulated Amortization
Amortized:
Service portfolios	$	2,068	$	(1,404	)	$	1,977	$	(1,307	)
Patents and trademarks	379		(202		)	361		(189		)
Collaboration intangible assets	3,637		(176		)	3,336		(86		)
Customer relationships and other	12,840		(3,410		)	12,430		(2,988		)
	18,924		(5,192		)	18,104		(4,570		)
Unamortized:
Trademarks and other	2,068		—			2,069		—
Total	$	20,992	$	(5,192	)	$	20,173	$	(4,570	)

Customer relationship intangible assets include payments made to our customers to secure certain contractual rights. Such payments are capitalized when there are distinct rights obtained and there are sufficient incremental cash flows to support the recoverability of the assets established. Otherwise, the applicable portion of the payments are expensed. We amortize these intangible assets based on the underlying pattern of economic benefit, which may result in an amortization method other than straight-line. In the aerospace industry, amortization based on the pattern of economic benefit generally results in lower amortization expense during the development period with increasing amortization expense as programs enter full production and aftermarket cycles. If a pattern of economic benefit cannot be reliably determined, a straight-line amortization method is used. We classify amortization of such payments as a reduction of sales. The collaboration intangible assets are amortized based upon the pattern of economic benefits as represented by the underlying cash flows.

Amortization of intangible assets for the quarter and nine months ended September 30, 2016 was $197 million and $578 million, respectively, compared with $183 million and $537 million for the same periods of 2015. The following is the expected amortization of intangible assets for the years 2016 through 2021, which reflects the pattern of expected economic benefit on certain aerospace intangible assets.

(Dollars in millions)	Remaining 2016		2017		2018		2019		2020		2021
Amortization expense	$	197	$	817	$	874	$	879	$	865	$	827