GOODWILL AND INTANGIBLE ASSETS

Goodwill - We record goodwill as the excess of the purchase price over the fair value of the net assets acquired in acquisitions accounted for under the purchase method of accounting. We test goodwill for impairment annually, or more frequently if circumstances indicate possible impairment. We identify a potential impairment by comparing the fair value of the applicable reporting unit to its net book value, including goodwill. If the net book value exceeds the fair value of the reporting unit, we measure the impairment by comparing the carrying value of the reporting unit to its fair value.

We test our goodwill for impairment by comparing the fair value of each of our reporting units to their net carrying value as of October 31 of each year. Our impairment analysis is quantitative; however, it includes subjective estimates based on assumptions regarding future growth rates, interest rates and operating expenses.

A lower fair value estimate in the future for any of our reporting units could result in goodwill impairments. Factors that could trigger a lower fair value estimate include sustained price declines of the reporting unit’s products and services, cost increases, regulatory or political environment changes, changes in customer demand, and other changes in market conditions, which may affect certain market participant assumptions used in the discounted future cash flow model based on internal forecasts of revenues and expenses over a specified period plus a terminal value (the income approach).

The income approach estimates fair value by discounting each reporting unit’s estimated future cash flows using a weighted-average cost of capital that reflects current market conditions and the risk profile of the reporting unit. To arrive at our future cash flows, we use estimates of economic and market assumptions, including growth rates in revenues, costs, estimates of future expected changes in operating margins, tax rates and cash expenditures. Future revenues are also adjusted to match changes in our business strategy. We believe this approach is an appropriate valuation method. Under the market multiple approach, we determine the estimated fair value of each of our reporting units by applying transaction multiples to each reporting unit’s projected EBITDA and then averaging that estimate with similar historical calculations using either a one, two or three year average. Our reporting unit valuations were determined primarily by utilizing the income approach, with a lesser weighting attributed the market multiple approach.

The excess of fair value over carrying amount for our Surface Technologies and Onshore/Offshore reporting units ranged from approximately 56% to in excess of 200% of the respective carrying amounts.

During the year ended December 31, 2018, we recorded $1,383.0 million of goodwill impairment charges in our Subsea reporting unit. Refer to Note 17 to these consolidated financial statements for additional disclosure related to impairment of goodwill during the year ended December 31, 2018.

The following table presents the significant estimates used by management in determining the fair values of our reporting units at December 31, 2018:



	2018
Year of cash flows before terminal value	5
Discount rates	12.0% to 13.0%
EBITDA multiples	7.0 - 8.5x

For recently acquired reporting units, a quantitative impairment test may indicate a fair value that is substantially similar to the reporting unit’s carrying amount. Such similarities in value are generally an indication that management’s estimates of future cash flows associated with the recently acquired reporting unit remain relatively consistent with the assumptions that were used to derive its initial fair value.

As discussed above, when evaluating the 2018 quantitative impairment test results, management considered many factors in determining whether an impairment of goodwill for any reporting unit was reasonably likely to occur in future periods, including future market conditions and the economic environment. Circumstances such as market declines, unfavorable economic conditions, loss of a major customer or other factors could increase the risk of impairment of goodwill for this reporting unit in future periods.

The carrying amount of goodwill by reporting segment was as follows:



(In millions)	Subsea			Onshore/Offshore			Surface Technologies		Total
December 31, 2015	$	2,977.4		$	809.1		$	—	$	3,786.5
Additions due to business combinations	—			—			—		—
Impairment	—			—			—		—
Translation	(46.3		)	(21.9		)	—		(68.2		)
December 31, 2016	2,931.1			787.2			—		3,718.3
Additions due to business combinations	2,532.6			1,635.5			997.8		5,165.9
Impairment	—			—			—		—
Translation	6.7			38.9			—		45.6
December 31, 2017	5,470.4			2,461.6			997.8		8,929.8
Additions due to business combinations	85.0			—			—		85.0
Impairment	(1,383.0		)	—			—		(1,383.0		)
Purchase accounting adjustments	—			—			19.7		19.7
Translation	(30.0		)	(13.9		)	—		(43.9		)
December 31, 2018	$	4,142.4		$	2,447.7		$	1,017.5	$	7,607.6

Intangible assets - The components of intangible assets were as follows:



	December 31,
	2018				2017
(In millions)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Acquired technology	$	246.7	$	49.3	$	240.0	$	25.0
Backlog	175.0		175.0		175.0		118.0
Customer relationships	285.0		57.4		285.0		29.0
Licenses, patents and trademarks	812.6		194.8		810.1		157.7
Software	232.1		159.1		237.9		145.5
Other	84.3		23.4		72.7		11.7
Total intangible assets	$	1,835.7	$	659.0	$	1,820.7	$	486.9

In connection with the Merger, we recorded identifiable intangible assets acquired. Refer to Note 2 to these consolidated financial statements for additional information regarding the Merger. All of our acquired identifiable intangible assets are subject to amortization and, where applicable, foreign currency translation adjustments.

We recorded $182.6 million, $244.5 million and $17.5 million in amortization expense related to intangible assets during the years ended December 31, 2018, 2017 and 2016, respectively. During the years 2019 through 2023, annual amortization expense is expected to be as follows: $126.4 million in 2019, $121.2 million in 2020, $116.5 million in 2021, $112.4 million in 2022, $107.5 million in 2023 and $592.7 million thereafter.