Goodwill and Intangible Assets

Goodwill

The following table summarizes the changes in the carrying amount of goodwill:



(in millions)
Balance as of December 31, 2016	$	15,416
Foreign currency translation	369
Balance as of December 31, 2017	15,785
Foreign currency translation	(122		)
Balance as of December 31, 2018	$	15,663

The latest impairment assessment of goodwill was completed in the third quarter of 2018. As of December 31, 2018, there were no accumulated goodwill impairment losses. Future impairment tests for goodwill will be performed annually in the third quarter, or earlier if impairment indicators exist.

Intangible Assets, Net

The following table summarizes intangible assets:



	2018							2017
as of December 31 (in millions)	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Definite-lived intangible assets
Developed product rights	$	15,872	$	(5,614	)	$	10,258	$	16,138	$	(4,982	)	$	11,156
License agreements	7,865		(1,810		)	6,055		7,822		(1,409		)	6,413
Total definite-lived intangible assets	23,737		(7,424		)	16,313		23,960		(6,391		)	17,569
Indefinite-lived research and development	4,920		—			4,920		9,990		—			9,990
Total intangible assets, net	$	28,657	$	(7,424	)	$	21,233	$	33,950	$	(6,391	)	$	27,559

Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets represent acquired IPR&D associated with products that have not yet received regulatory approval. Indefinite-lived intangible assets as of December 31, 2018 and 2017 related to the acquisitions of Stemcentrx and BI compounds. See Note 5 for additional information. The latest annual impairment assessment of indefinite-lived intangible assets was completed in the third quarter of 2018 which supported that no impairment existed at that time.

During the fourth quarter of 2018, the company made a decision to stop enrollment for the TAHOE trial, a Phase 3 study evaluating Rova-T as a second-line therapy for advanced small cell lung cancer following a recommendation from an Independent Data Monitoring Committee. This decision lowered the probabilities of success of achieving regulatory approval across Rova-T and other early-stage assets and represented a triggering event which required the company to evaluate for impairment the IPR&D assets associated with the Stemcentrx acquisition. The company utilized multi-period excess earnings models of the “income approach” and determined that the current fair value was $1.0 billion as of December 31, 2018, which was lower than the carrying value of $6.1 billion and resulted in a pre-tax impairment charge of $5.1 billion ($4.5 billion after tax). The fair value measurements were based on Level 3 inputs. Some of the more significant assumptions inherent in the development of the models included the estimated annual cash flows for each asset (including net revenues, cost of sales, R&D costs, selling and marketing costs and working capital/contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, the regulatory approval probabilities, commercial success risks, competitive landscape as well as other factors. This impairment charge was recorded to R&D expense in the consolidated statement of earnings for the year ended December 31, 2018. AbbVie continues to evaluate information as it becomes available with respect to the Stemcentrx-related clinical development programs and will monitor the remaining IPR&D assets for further impairment.

No indefinite-lived intangible asset impairment charges were recorded in 2017 and 2016. Future impairment tests for indefinite-lived intangible assets will be performed annually in the third quarter, or earlier if impairment indicators exist.

Definite-Lived Intangible Assets

Definite-lived intangible assets are amortized over their estimated useful lives, which range between 2 to 16 years with an average of 11 years for both developed product rights and license agreements. Amortization expense was $1.3 billion in 2018, $1.1 billion in 2017 and $764 million in 2016 and was included in cost of products sold in the consolidated statements of earnings. The anticipated annual amortization expense for definite-lived intangible assets recorded as of December 31, 2018 is as follows:



(in billions)	2019		2020		2021		2022		2023
Anticipated annual amortization expense	$	1.5	$	1.7	$	1.9	$	2.1	$	2.2

No definite-lived intangible asset impairment charges were recorded in 2018. In 2017, an impairment charge of $354 million was recorded related to ZINBRYTA that reduced both the gross carrying amount and net carrying amount of the underlying intangible assets due to lower expected future cash flows for the product. In 2016, an impairment charge of $39 million was recorded related to certain developed product rights in the United States due to a decline in the market for the product. The 2017 and 2016 impairment charges were based on discounted cash flow analyses and were included in cost of products sold in the consolidated statements of earnings.