Goodwill and Identifiable Intangible Assets

9 Months Ended

Sep. 23, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Identifiable Intangible Assets

8. Goodwill and Identifiable Intangible Assets

Goodwill. In accordance with the accounting standards for business combinations, the Company records the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition (commonly referred to as the purchase price allocation). The table below presents the changes in goodwill allocated to the Company’s reporting units in each reportable segment.


	Electronic Systems			Aerospace Systems			Communication Systems			Consolidated Total
	(in millions)
Goodwill	$	3,994		$	1,691		$	1,038		$	6,723
Accumulated impairment losses		(69	)		(338	)		(35	)		(442	)

Balance at December 31, 2015		3,925			1,353			1,003			6,281

Business acquisitions⁽¹⁾		2			—			20			22
Foreign currency translation adjustments⁽²⁾		(31	)		12			—			(19	)

Balance at September 23, 2016	$	3,896		$	1,365		$	1,023		$	6,284

Goodwill	$	3,965		$	1,703		$	1,058		$	6,726
Accumulated impairment losses		(69	)		(338	)		(35	)		(442	)

	$	3,896		$	1,365		$	1,023		$	6,284

⁽¹⁾	The net increase in goodwill for the Electronic Systems segment was due to the final purchase price allocations for the ForceX, Inc. and CTC Aviation Group business acquisitions. The increase in goodwill for the Communication Systems segment was due to the ATM, Inc. business acquisition.

⁽²⁾

The decrease in goodwill presented in the Electronic Systems segment was due to the strengthening of the U.S. dollar against the British pound, partially offset by the weakening of the U.S. dollar against the Canadian dollar and the Euro during the year-to-date period ended September 23, 2016. The increase in goodwill presented in the Aerospace Systems segment was due to the weakening of the U.S. dollar against the Canadian dollar during the year-to-date period ended September 23, 2016.

Identifiable Intangible Assets. The most significant identifiable intangible asset that is separately recognized for the Company’s business acquisitions is customer contractual relationships. All of the Company’s customer relationships are established through written customer contracts (revenue arrangements). The fair value for customer contractual relationships is determined, as of the date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows (including cash flows for working capital) arising from the follow-on sales on contract (revenue arrangement) renewals expected from the customer contractual relationships over their estimated lives, including the probability of expected future contract renewals and sales, less a contributory assets charge, all of which is discounted to present value.

Identifiable Intangible Assets. The table below presents information for the Company’s identifiable intangible assets that are subject to amortization.


			September 23, 2016						December 31, 2015
	Weighted Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in years)		(in millions)
Customer contractual relationships		17	$	376	$	263	$	113	$	370	$	246	$	124
Technology		11		158		99		59		156		91		65
Other		18		21		12		9		21		11		10

Total		15	$	555	$	374	$	181	$	547	$	348	$	199

The table below presents amortization expense recorded by the Company for its identifiable intangible assets.


	Third Quarter Ended				Year-to-Date Ended
	September 23, 2016		September 25, 2015		September 23, 2016		September 25, 2015
	(in millions)
Amortization expense	$	9	$	9	$	26	$	26

Based on gross carrying amounts at September 23, 2016, the Company’s estimate of amortization expense for identifiable intangible assets for the years ending December 31, 2016 through 2020 is presented in the table below.


	Year Ending December 31,
	2016		2017		2018		2019		2020
	(in millions)
Estimated amortization expense	$	35	$	32	$	27	$	24	$	20

- 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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