GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Changes in the carrying amount of goodwill, by reportable segment, were as follows (in millions):



	CHCA			CHCI			RX			Specialty Sciences			Other			Total
Balance at June 27, 2015	$	1,817.2		$	1,530.2		$	1,086.0		$	199.6		$	88.2		$	4,721.2
Business acquisitions	9.7			87.4			—			—			—			97.1
Changes in assets held-for-sale	(13.0		)	—			—			—			(14.6		)	(27.6		)
Currency translation adjustments	(0.8		)	(53.3		)	(1.9		)	—			(2.1		)	(58.1		)
Purchase accounting adjustments	1.2			418.9			—			—			—			420.1
Balance at December 31, 2015	1,814.3			1,983.2			1,084.1			199.6			71.5			5,152.7
Business acquisitions	—			—			1.7			—			—			1.7
Changes in assets held-for-sale	4.5			—			—			—			9.0			13.5
Impairments	(24.5		)	(868.4		)	—			(199.6		)	—			(1,092.5		)
Currency translation adjustments	(0.9		)	(27.5		)	0.8			—			0.9			(26.7		)
Purchase accounting adjustments	17.2			(16.5		)	—			—			—			0.7
Balance at December 31, 2016	1,810.6			1,070.8			1,086.6			—			81.4			4,049.4
Re-allocation of goodwill⁽¹⁾	35.3			—			27.7			—			(63.0		)	—
Business divestitures	—			(4.1		)	—			—			(26.4		)	(30.5		)
Currency translation adjustments	1.5			139.0			8.0			—			8.0			156.5
Balance at December 31, 2017	$	1,847.4		$	1,205.7		$	1,122.3		$	—		$	—		$	4,175.4

⁽¹⁾ Certain cash flow associated with the API business were retained. We performed a relative fair value allocation of the business retained and allocated it among the two segments where the business was allocated.

The increase in goodwill in the year ended December 31, 2017 was due primarily to foreign currency translation adjustments. The decrease in goodwill for the year ended December 31, 2016 was due primarily to impairment charges recorded in the CHCI and Specialty Sciences segments as discussed below. The increase in goodwill in the six months ended December 31, 2015 was due primarily to purchase accounting adjustments to the Omega acquisition, as well as the Naturwohl and GSK acquisitions recorded in the CHCI segment (refer to Note 2).

As required by our policy, we tested goodwill for impairment in the fourth quarter of 2017 (refer to Note 1). We determined the fair value of each of our reporting units exceeded their net book values. The fair values of the BCH, UK AUS and Animal Health reporting units were each less than 25.0% higher than their respective net book values as of the annual assessment date. As a result, these reporting units are inherently at a higher risk for future impairments if they experience deterioration in business performance or market multiples, or increases in discount rates. These reporting units had the following remaining goodwill balances as of December 31, 2017 (in millions):



Reporting Unit	Goodwill Remaining in Reporting Unit		Segment	Fair Value in excess of Carrying Value
BCH	$	1,026.0	CHCI	6.6%
Animal Health	$	178.9	CHCA	23.6%
UK AUS	$	53.1	CHCI	18.3%

Subsequently, at the end of the fourth quarter of 2017, the Animal Health reporting unit had an indication of potential impairment resulting from the termination of a supply agreement. We prepared an impairment test as of December 31, 2017 and determined the fair value of the Animal Health reporting unit continued to exceed net book value, by 8.9%. The 8.9% margin was lower than the excess fair value over carrying value of 23.6% that was estimated as of October 1, 2017. Therefore, while no impairment was recorded in 2017, the supply agreement termination increased the risk of future impairment in this reporting unit.

The discounted cash flow forecasts used for these reporting units in goodwill impairment testing include assumptions about future activity levels in both the near term and longer-term. If growth in these reporting units is lower than expected, we may experience deterioration in our cash flow forecasts that may indicate goodwill in the reporting units may be impaired in future impairment tests. We continue to monitor the progress and assess the reporting units for potential impairment should impairment indicators arise, as applicable, and at least annually during our fourth quarter impairment testing.

During the year ended December 31, 2016, we identified indicators of goodwill impairment for certain of our reporting units, which required us to complete interim goodwill impairment testing (refer to Note 1 for our impairment process). Step one of the goodwill impairment test involves determining the fair value of the reporting unit using a discounted cash flow technique and comparing it to the reporting unit’s carrying value. The main assumptions supporting the cash flow projections used to determine the reporting units’ fair value include revenue growth based on product line extensions, product life cycle strategies, and geographical expansion within the markets in which the reporting unit distributes products, gross margins consistent with historical trends, and advertising and promotion investments largely consistent with the reporting unit's growth plans. If a reporting unit does not pass step one of the goodwill impairment test, step two is completed. The second step of the goodwill impairment test requires that we determine the implied fair value of the reporting unit’s goodwill, which involves determining the value of the reporting unit’s individual assets and liabilities. If the reporting unit’s carrying value exceeds its book value, an impairment charge is recorded.

During the three months ended April 2, 2016, we identified indicators of impairment for our Branded Consumer Healthcare - Rest of World ("BCH-ROW") reporting unit, which comprises primarily operations attributable to the Omega acquisition in all geographic regions except for Belgium. The primary impairment indicators included the decline in our 2016 performance expectations and a reduction in our long-range revenue growth forecast. BCH-ROW did not pass step one of goodwill impairment testing. The change in fair value from previous estimates was due primarily to the changes in the market and performance of the brands such that the evaluation of brand prioritization and product extensions or launches in new regions are being more focused to maximize the potential of all brands in the segment's portfolio. Based on our evaluation and initial estimates of the fair values of the assets and liabilities and the deficit of the fair value when compared to the related book value, we recorded $130.5 million in impairment charges on the Consolidated Statement of Operations within our CHCI segment.

During the three months ended October 1, 2016, we identified additional indicators of goodwill impairment in both our BCH-ROW and our Branded Consumer Healthcare - Belgium ("BCH-Belgium") reporting units. With respect to both reporting units, the primary impairment indicators included an additional decline in our 2016 performance expectations for the remainder of the year and a reduction in our long-range revenue growth and margin forecasts due to the factors outlined below. Neither the BCH-ROW nor the BCH-Belgium reporting units passed step one of goodwill impairment testing.

As it relates to the BCH-ROW reporting unit, the changes in fair value from previous estimates were due primarily to (1) changes in the market and performance of certain brands due to moderated new product launch assumptions, (2) execution of certain key product strategies falling short of expectations causing a reduction to baseline forecast models in France, Germany and Italy and (3) certain macro-economic factors continuing to impact the business more than expected in France, Russia and Turkey in addition to unfavorable foreign currency impacts experienced (primarily in the UK related to Brexit.) As it relates to the BCH-Belgium reporting unit, the changes in fair value from previous estimates were due to changes in the forecasts as a result of a reduction in volume with a major wholesaler due to factors consistent with those outlined for the BCH-ROW reporting unit.

Based on our estimates of the fair values of the assets and liabilities and the deficit of the fair value when compared to the related book value, we recorded an impairment charge of $675.6 million related to the BCH-ROW reporting unit and $62.3 million related to the BCH-Belgium reporting unit on the Consolidated Statement of Operations within our CHCI segment.

During the three months ended December 31, 2016, we identified indicators of goodwill impairment in the BCH-Belgium reporting unit related to the early termination of a distribution agreement. We prepared a goodwill impairment test as of December 3, 2016, which was the end of the month in which the impairment indicator occurred. Step one of the goodwill impairment test indicated that the fair value of the BCH-Belgium reporting unit as greater than its net book value. As a result, we did not perform the second step of the goodwill impairment test.

During the three months ended December 31, 2016, we identified indicators of goodwill impairment in the Animal Health reporting unit related to changes in the market and performance of certain brands. We prepared a goodwill impairment test as of October 2, 2016 as part of our annual goodwill impairment testing process. Step one of the goodwill impairment test indicated that the fair value of the Animal Health reporting unit was below its net book value. As a result, we performed the second step of the goodwill impairment test to measure the amount of impairment. We concluded that Animal Health goodwill was impaired by $24.5 million, which we recorded in Impairment charges on the Consolidated Statement of Operations within our CHCA segment.

During the three months ended December 31, 2016, we identified indicators of goodwill impairment in the Specialty Sciences reporting unit related to our decision to review strategic alternatives for the Tysabri^®financial asset. As a result of the impairment indicators, we prepared a goodwill impairment test as of December 31, 2016. Step one of the goodwill impairment test indicated that the fair value of the Specialty Sciences reporting unit was below its net book value. As a result, we initiated the second step of the goodwill impairment test to measure the amount of impairment. We concluded that the goodwill was fully impaired and recorded an impairment of $199.6 million in Impairment charges on the Consolidated Statement of Operations within our Specialty Sciences segment.

No impairment charges were recorded as a result of the annual goodwill impairment testing during the six months ended December 31, 2015. During the year ended June 27, 2015, we performed our annual goodwill impairment testing, which indicated that our CHCA Mexico reporting unit's goodwill fair value was below its net book value as of March 28, 2015. As a result, we initiated the second step of the goodwill impairment test to measure the amount of impairment. We concluded that the goodwill was fully impaired and recorded an impairment of $6.8 million in the CHCA segment during the year ended June 27, 2015 in Impairment charges. No other segments were affected by this impairment charge.

Intangible Assets

Other intangible assets and the related accumulated amortization consisted of the following (in millions):



	December 31, 2017				December 31, 2016				December 31, 2015
	Gross		Accumulated Amortization		Gross		Accumulated Amortization		Gross		Accumulated Amortization
Definite-lived intangibles:
Distribution and license agreements, supply agreements	$	311.2	$	169.8	$	305.6	$	120.4	$	242.4	$	77.7
Developed product technology, formulations, and product rights	1,358.4		598.7		1,418.1		526.0		1,387.6		426.0
Customer relationships and distribution networks	1,642.0		460.6		1,489.9		307.5		1,520.7		193.0
Trademarks, trade names, and brands	1,335.4		129.5		1,189.3		55.3		539.4		22.8
Non-compete agreements	14.7		12.6		14.3		11.2		15.2		12.7
Total definite-lived intangibles	$	4,661.7	$	1,371.2	$	4,417.2	$	1,020.4	$	3,705.3	$	732.2
Indefinite-lived intangibles:
Trademarks, trade names, and brands	$	52.1	$	—	$	50.5	$	—	$	1,868.1	$	—
In-process research and development	38.2		—		64.0		—		48.2		—
Total indefinite-lived intangibles	$	90.3	$	—	$	114.5	$	—	$	1,916.3	$	—
Total other intangible assets	$	4,752.0	$	1,371.2	$	4,531.7	$	1,020.4	$	5,621.6	$	732.2

Certain intangible assets are denominated in currencies other than the U.S. dollars; therefore, their gross and net carrying values are subject to foreign currency movements.

The increase in gross amortizable intangible assets during the year ended December 31, 2017 was due primarily to foreign currency translation. The decrease in gross amortizable intangible assets during the year ended December 31, 2016 was due to the reclassification of Omega indefinite-lived assets to definite-lived assets as described below, offset by current year impairments taken as described below. The increase during the six months ended December 31, 2015 was due to the Entocort^®, GSK, Naturwohl, and ScarAway^® acquisitions, offset partially by purchase price adjustments to the Omega intangible assets (refer to Note 2).

Intangible asset impairments taken are as follows (in millions):



	Year Ended										Six Months Ended
	December 31, 2017				December 31, 2016						December 31, 2015
	Definite-Lived Intangible Assets		IPR&D		Indefinite-Lived Intangible Assets		Definite-Lived Intangible Assets		IPR&D		Indefinite-Lived Intangible Assets
CHCA	$	—	$	—	$	0.4	$	—	$	—	$	—
CHCI	—		1.1		849.1		321.4		3.5		185.1
RX	19.7		11.6		—		342.2		—		—
Other	—		—		—		2.0		—		—
	$	19.7	$	12.7	$	849.5	$	665.6	$	3.5	$	185.1

During the three months ended July 1, 2017, we identified impairment indicators for our Lumara Health, Inc. ("Lumara") product assets. The primary impairment indicators included the decline in our 2017 performance expectations and a reduction in our long-range revenue growth forecast. The assessment utilized the multi-period excess earnings method to determine fair value and resulted in an impairment charge of $18.5 million in Impairment charges on the Consolidated Statements of Operations within our RX segment, which represented the difference between the carrying amount of the intangible assets and their estimated fair value.

During the three months ended April 2, 2016, we identified indicators of impairment associated with certain indefinite-lived intangible assets acquired in conjunction with the Omega acquisition. The primary impairment indicators included the decline in our 2016 performance expectations and a reduction in our long-range revenue growth forecast. The assessment utilized the excess earnings method to determine fair value and resulted in an impairment charge of $273.4 million in Impairment charges on the Consolidated Statements of Operations within our CHCI segment, which represented the difference between the carrying amount of the intangible assets and their estimated fair value. The change in fair value from previous estimates was due primarily to the changes in the market and performance of the brands such that the evaluation of brand prioritization and product extensions or launches in new regions are being more focused to maximize the potential of all brands in the segment's portfolio. The main assumptions supporting the fair value of these assets and cash flow projections included revenue growth based on product line extensions, product life cycle strategies, geographical expansion within the markets in which the CHCI segment distributes products, gross margins consistent with historical trends, and advertising and promotion investments largely consistent with the segment's growth plans.

During the three months ended October 1, 2016, we identified additional indicators of impairment associated with certain indefinite-lived and definite-lived intangible brand category assets acquired in conjunction with the Omega acquisition. The primary impairment indicators are discussed above in goodwill. The assessment of the indefinite-lived assets utilized the excess earnings method to determine fair value and resulted in an impairment charge of $575.7 million. With regards to definite-lived assets, it was determined that the carrying value of one asset group was not recoverable based on an assessment of the undiscounted future cash flows expected to be generated by the asset group. Given this, the excess earnings method was utilized to determine fair value of the definite-lived asset and resulted in an impairment charge of $290.9 million. Both charges, which represented the difference between the carrying amount of the intangible assets and their estimated fair value, were recorded in Impairment charges on the Consolidated Statements of Operations within our CHCI segment. The main assumptions supporting the fair value of these assets and cash flow projections are included in the goodwill discussions above.

During the three months ended December 31, 2016, we identified impairment indicators in our Entocort^® product assets which related to the entrance of new market competition and resulting negative impacts on sales volume and pricing. Utilizing a multi-period excess earnings method, we determined that the Entocort^® product assets were impaired by $342.2 million. We recorded this impairment in Impairment charges on the Consolidated Statement of Operations within our RX segment.

During the three months ended December 31, 2016, we identified impairment indicators in certain definite-lived intangible assets, including trademarks and trade names related to our Herron products that we originally acquired through the acquisition of Aspen. After determining the assets were impaired, we utilized the relief from royalty method to quantify the impairment, resulting in a $30.5 million impairment. We recorded these impairments in Impairment charges on the Consolidated Statement of Operations within our CHCI segment.

During our impairment testing for the six months ended December 31, 2015, we identified an impairment of certain indefinite-lived intangible assets based on management’s expectations of the prospects for future revenues, profits, and cash flows associated with these assets. The indefinite-lived intangible assets were purchased in conjunction with the Omega acquisition and are included in the CHCI segment. The assessment utilized the excess earnings method to determine fair value and resulted in an impairment charge of $185.1 million, which represents the difference between the carrying amount of the intangible assets and their estimated fair value. The amount was recorded in Impairment charges on the Consolidated Statements of Operations within the CHCI segment. The primary assumptions supporting the fair value of these assets and cash flow projections assume modest revenue growth based on product line extensions, product life cycle strategies, and geographical expansion within the markets in which the CHCI segment currently distributes products, and gross margins and advertising and promotion investments largely consistent with historical trends.

No material impairment charges were recorded as a result of the annual intangible asset impairment testing during the year ended June 27, 2015.

We recorded an impairment charge of $12.7 million and $3.5 million on certain IPR&D assets during the years ended December 31, 2017 and December 31, 2016, respectively, due to changes in the projected development and regulatory timelines for various projects, we also recorded a decrease in the contingent consideration liability associated with certain IPR&D assets in Other operating income on the Consolidated Statements of Operations (refer to Note 6).

In addition, due to reprioritization of certain brands in the CHCI segment and change in performance expectations for the cough/cold/allergy, anti-parasite, personal care, lifestyle, and natural health brands, we reclassified $364.5 million and $674.4 million of indefinite-lived assets to definite-lived assets with useful lives of 20 years, which we began amortizing during the second and third quarters of 2016, respectively.

The remaining weighted-average useful life for our amortizable intangible assets by asset class at December 31, 2017 was as follows:



Amortizable Intangible Asset Category		Remaining Weighted-Average Useful Life (Years)
Distribution and license agreements, supply agreements		7
Developed product technology, formulations, and product rights		12
Customer relationships and distribution networks		17
Trademarks, trade names, and brands		20
Non-compete agreements		2

We recorded amortization expense of $349.6 million, $356.8 million, $128.6 million, $174.5 million during the years ended December 31, 2017 and December 31, 2016, the six months ended December 31, 2015, and the year ended June 27, 2015, respectively. The amortization expense in the year ended December 31, 2017 remained relatively flat. The increase in amortization expense in the year ended December 31, 2016 was due primarily to the incremental amortization expense incurred on the definite-lived intangible assets acquired from the Omega, Entocort^®,and Tretinoin Products acquisitions. In addition, we incurred additional amortization in 2016 due to the previously indefinite-lived Omega brands changing classification to definite-lived during the year. The increase in amortization expense in the six months ended December 31, 2015 was due primarily to definite-lived assets acquired from Omega. The increase in amortization expense in the year ended June 27, 2015 was due primarily to the inclusion of one quarter of amortization expense related to the intangible assets acquired from Omega.

Estimated future amortization expense includes the additional amortization related to recently acquired intangible assets subject to amortization. Our estimated future amortization expense is as follows (in millions):



Year	Amount
2018	$	341.0
2019	316.4
2020	280.8
2021	251.8
2022	222.0
Thereafter	1,878.5