NOTE 9. GOODWILL AND OTHER INTANGIBLES

Goodwill

Changes in the carrying amount of our goodwill for the three months ended March 31, 2019 were as follows (in thousands):



	Branded Pharmaceuticals		Sterile Injectables		Generic Pharmaceuticals			International Pharmaceuticals		Total
Goodwill as of December 31, 2018	$	828,818	$	2,731,193	$	151,108		$	53,517	$	3,764,636
Effect of currency translation	—		—		—			1,165		1,165
Goodwill impairment charges	—		—		(86,000		)	—		(86,000		)
Goodwill as of March 31, 2019	$	828,818	$	2,731,193	$	65,108		$	54,682	$	3,679,801

The carrying amounts of goodwill at March 31, 2019 and December 31, 2018 are net of the following accumulated impairments (in thousands):



	Branded Pharmaceuticals		Sterile Injectables		Generic Pharmaceuticals		International Pharmaceuticals		Total
Accumulated impairment losses as of December 31, 2018	$	855,810	$	—	$	2,991,549	$	456,408	$	4,303,767
Accumulated impairment losses as of March 31, 2019	$	855,810	$	—	$	3,077,549	$	466,317	$	4,399,676

Other Intangible Assets

Changes in the amount of other intangible assets for the three months ended March 31, 2019 are set forth in the table below (in thousands).



Cost basis:	Balance as of December 31, 2018			Acquisitions			Impairments			Effect of Currency Translation			Balance as of March 31, 2019
Indefinite-lived intangibles:
In-process research and development	$	93,900		$	—		$	—		$	—		$	93,900
Total indefinite-lived intangibles	$	93,900		$	—		$	—		$	—		$	93,900
Finite-lived intangibles:
Licenses (weighted average life of 14 years)	$	457,402		$	—		$	—		$	—		$	457,402
Tradenames	6,409			—			—			—			6,409
Developed technology (weighted average life of 11 years)	6,182,015			—			(78,700		)	5,356			6,108,671
Total finite-lived intangibles (weighted average life of 11 years)	$	6,645,826		$	—		$	(78,700	)	$	5,356		$	6,572,482
Total other intangibles	$	6,739,726		$	—		$	(78,700	)	$	5,356		$	6,666,382

Accumulated amortization:	Balance as of December 31, 2018			Amortization			Impairments			Effect of Currency Translation			Balance as of March 31, 2019
Finite-lived intangibles:
Licenses	$	(398,182	)	$	(4,869	)	$	—		$	—		$	(403,051	)
Tradenames	(6,409		)	—			—			—			(6,409		)
Developed technology	(2,877,829		)	(140,730		)	—			(2,769		)	(3,021,328		)
Total other intangibles	$	(3,282,420	)	$	(145,599	)	$	—		$	(2,769	)	$	(3,430,788	)
Net other intangibles	$	3,457,306											$	3,235,594

Amortization expense for the three months ended March 31, 2019 and 2018 totaled $145.6 million and $157.2 million, respectively. Amortization expense is included in Cost of revenues in the Condensed Consolidated Statements of Operations. Estimated amortization of intangibles for the five fiscal years subsequent to December 31, 2018 is as follows (in thousands):



2019	$	545,757
2020	$	461,267
2021	$	419,045
2022	$	403,142
2023	$	372,939

Impairments

Endo tests goodwill and indefinite-lived intangible assets for impairment annually, or more frequently whenever events or changes in circumstances indicate that the asset might be impaired. Our annual assessment is performed as of October 1st.

As part of our goodwill and intangible asset impairment assessments, we estimate the fair values of our reporting units and our intangible assets using an income approach that utilizes a discounted cash flow model or, where appropriate, a market approach. The discounted cash flow models are dependent upon our estimates of future cash flows and other factors. These estimates of future cash flows involve assumptions concerning (i) future operating performance, including future sales, long-term growth rates, operating margins, tax rates, variations in the amount and timing of cash flows and the probability of achieving the estimated cash flows and (ii) future economic conditions. These assumptions are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. The discount rates applied to the estimated cash flows are based on the overall risk associated with the particular assets and other market factors. We believe the discount rates and other inputs and assumptions are consistent with those that a market participant would use. Any impairment charges resulting from annual or interim goodwill and intangible asset impairment assessments are recorded to Asset impairment charges in our Condensed Consolidated Statements of Operations.

During the three months ended March 31, 2019 and 2018, the Company incurred the following goodwill and other intangible asset impairment charges (in thousands):



	Three Months Ended March 31,
	2019		2018
Goodwill impairment charges	$	86,000	$	391,000
Other intangible asset impairment charges	$	78,700	$	54,200

A summary of significant goodwill and other intangible asset impairment tests and related charges is included below. Pre-tax non-cash intangible asset impairment charges related primarily to certain in-process research and development and/or developed technology intangible assets that were tested for impairment following changes in market conditions and certain other factors impacting recoverability.

As a result of certain competitive events that occurred during the first quarter of 2019, we tested the goodwill of our Generic Pharmaceuticals reporting unit for impairment as of March 31, 2019. The fair value of the reporting unit was estimated using an income approach that utilized a discounted cash flow model. The discount rate utilized in this test was 10.5%. This goodwill impairment test resulted in a pre-tax non-cash goodwill impairment charge of $86.0 million during the three months ended March 31, 2019, representing the excess of this reporting unit’s carrying amount over its estimated fair value. The Generic Pharmaceuticals impairment can be primarily attributed to the impact of the competitive events referenced above and an increase in the discount rate used in the determination of fair value.

During the first quarter of 2018, a change in segments resulted in changes to our reporting units for goodwill impairment testing purposes, including the creation of a new Sterile Injectables reporting unit, which was previously part of our Generics reporting unit. As a result of these changes, under U.S. GAAP, we tested the goodwill of the former Generics reporting unit immediately before the segment realignment and the goodwill of both the new Sterile Injectables and Generic Pharmaceuticals reporting units immediately after the segment realignment. These goodwill tests were performed using an income approach that utilizes a discounted cash flow model. The results of these goodwill impairment tests were as follows:


•	The former Generics reporting unit’s estimated fair value exceeded its carrying amount, resulting in no related goodwill impairment charge.


•	The new Sterile Injectables reporting unit’s estimated fair value exceeded its carrying amount, resulting in no related goodwill impairment charge.


•	The new Generic Pharmaceuticals reporting unit’s carrying amount exceeded its estimated fair value, resulting in a pre-tax non-cash goodwill impairment charge of $391.0 million.