GOODWILL

12 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

In accordance with ASC Topic 350-20, "Intangibles – Goodwill and Other", goodwill is reviewed for impairment annually during the fourth quarter of the fiscal year or more frequently if certain indicators arise. If business conditions or other factors cause the operating results and cash flows of a reporting unit to decline, the company may be required to record impairment charges

for goodwill at that time. The company tests goodwill for impairment at a level of reporting referred to as a reporting unit, which is an operating segment or one level below an operating segment (referred to as a component). A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component. When two or more components of an operating segment have similar economic characteristics, the components are aggregated and deemed a single reporting unit. An operating segment is deemed to be a reporting unit if all of its components are similar, if none of its components are a reporting unit, or if the segment comprises only a single component.

Annual Impairment Analysis

ASC Topic 350 allows entities to perform an initial qualitative evaluation to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The results of this qualitative assessment determine whether it is necessary to perform the quantitative impairment test. As allowed by the revised guidance, the company has elected to bypass the qualitative assessment for fiscal year 2019 and proceed directly to the quantitative impairment test.

Excluding the qualitative evaluation discussed above, the quantitative goodwill impairment review is a comparison of the fair value of a reporting unit with its carrying amount. Estimates of fair value are primarily determined by using discounted cash flows and market multiples on earnings. If the carrying amount of a reporting unit exceeds its fair value, an impairment charge based on that difference will be recorded. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit.

The impairment review is highly judgmental and involves the use of significant estimates and assumptions. These estimates and assumptions have a significant impact on the amount of any impairment charge recorded. Discounted cash flow methods are dependent upon assumptions of future sales trends, market conditions and cash flows of each reporting unit over several years. Actual cash flows in the future may differ significantly from those previously forecasted.

For fiscal year 2019, the fair value of all of the company’s reporting units exceeded their carrying values.

Realignment of Reporting Units

As discussed in Note 26, the company realigned its operations in the second quarter of fiscal year 2019, resulting in a change to its reportable segments. The company's reporting units did not change as a result of the change in reportable segments. The Commercial Truck segment contains one reporting unit. The Aftermarket, Industrial and Trailer segment contains five reporting units.

Acquisition of AxleTech Business

On July 26, 2019, the company acquired 100 percent of the voting equity interest of the AxleTech group companies for approximately $179 million in cash, subject to certain purchase price adjustments. The AxleTech acquisition was accounted for as a business combination. The company recorded a provisional amount of goodwill of $61 million for the excess of consideration paid over the fair value of the individual assets acquired and liabilities assumed, excluding identifiable intangible assets. This recorded goodwill consists largely of the synergies and economies of scale from combining the operations of the company and AxleTech. All of the goodwill was assigned to the Aftermarket, Industrial and Trailer reportable segment.

Acquisition of AA Gear & Manufacturing, Inc. Business

On April 30, 2018, the company acquired substantially all of the assets of AAG for a cash purchase price of approximately $35 million and the assumption of certain liabilities. The AAG acquisition was accounted for as a business combination. The company recorded goodwill in the amount of $12 million for the excess of consideration paid over the fair value of the individual assets acquired and liabilities assumed. This recorded goodwill consists largely of the synergies and economies of scale expected from combining the operations of the company and AAG. All of the goodwill was assigned to the Aftermarket, Industrial and Trailer reportable segment. All goodwill recognized is expected to be deductible for income tax purposes over the next 15 years.

Acquisition of Fabco Holdings, Inc. Business

On August 31, 2017, the company acquired certain assets of Fabco, including its product portfolio and related technologies, for a cash purchase price of $34 million and the assumption of certain liabilities. The Fabco acquisition was accounted for as a business combination. As a result, we recorded goodwill in the amount of $20 million for the excess of consideration paid over the fair value of the individual assets acquired and liabilities assumed. This recorded goodwill consists largely of the synergies

and economies of scale expected from combining the operations of the company and Fabco. All of the goodwill was assigned to the Aftermarket, Industrial and Trailer reportable segment.

A summary of the changes in the carrying value of goodwill is presented below (in millions):



	Commercial Truck			Aftermarket, Industrial and Trailer			Total
Goodwill ⁽¹⁾	$	269		$	160		$	429
Accumulated impairment losses ⁽¹⁾	—			(15		)	(15		)
Balance at September 30, 2017 ⁽¹⁾	269			145			414
Adjustment due to sale of a business ⁽¹⁾	(1		)	—			(1		)
Fabco measurement period adjustment ⁽¹⁾	—			1			1
Goodwill acquired from acquisition ⁽¹⁾	—			9			9
Foreign currency translation⁽¹⁾	(2		)	—			(2		)
Balance at September 30, 2018⁽¹⁾	266			155			421
AAG measurement period adjustment (see Note 4)	—			3			3
Goodwill acquired from acquisition (see Note 4)	—			61			61
Foreign currency translation	(5		)	(2		)	(7		)
Balance at September 30, 2019	$	261		$	217		$	478

⁽¹⁾ Amounts have been recast to reflect reportable segment changes (see Note 26).