GOODWILL AND INTANGIBLE ASSETS

GOODWILL

The changes in the carrying value of goodwill are detailed below by segment:



	Oilfield Services			Oilfield Equipment			Turbo-machinery & Process Solutions			Digital Solutions			Total
Balance at December 31, 2015, gross	$	2,885		$	3,840		$	1,853		$	2,043		$	10,621
Accumulated impairment at December 31, 2015	(2,633		)	(867		)	—			(254		)	(3,754		)
Balance at December 31, 2015	252			2,973			1,853			1,789			6,867
Acquisitions and purchase accounting adjustments				19			(1		)				18
Currency exchange and others	(106		)	(7		)	(38		)	(54		)	(205		)
Balance at December 31, 2016	146			2,985			1,814			1,735			6,680
Acquisition ⁽¹⁾	13,052			—			—			—			13,052
Currency exchange and others	7			49			92			47			195
Balance at December 31, 2017	$	13,205		$	3,034		$	1,906		$	1,782		$	19,927


⁽¹⁾	Includes goodwill associated with the acquisition of Baker Hughes. This amount and its allocations to segments are preliminary.

Subsequent to the close of the acquisition of Baker Hughes, we realigned our reporting units to Oilfield Services (OFS), Oilfield Equipment (OFE), Turbomachinery & Process Solutions (TPS) and Digital Solutions (DS) (refer to "Note 17. Segment Information") and reallocated the goodwill that existed as of June 30, 2017 to the new reportable segments for all historical periods presented. The majority of Baker Hughes business was combined with the GE O&G Surface business to create the new Oilfield Services reporting segment. Our reporting units are the same as our four reportable segments.

We test goodwill for impairment annually in the third quarter of each year using data as of July 1 of that year, which would include consideration of any segment realignment. The impairment test consists of two steps: in step one, the carrying value of the reporting unit is compared with its fair value; in step two, which is applied only when the carrying value is more than its fair value, the amount of goodwill impairment, if any, is derived by deducting the fair value of the reporting unit's assets and liabilities from the fair value of its equity, and comparing that amount with the carrying amount of goodwill. We determined fair values for each of the reporting units using a combination of the market approach and the income approach. We assessed the valuation methodologies based upon the relevance and available data and have weighted the results appropriately.

Valuations using the market approach were derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses was based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services. A market approach is limited to reporting units for which there are publicly traded companies that have the characteristics similar to our businesses.

Under the income approach, fair value was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We used our internal forecasts to estimate future cash flows and included an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business. Actual results may differ from those assumed in our forecasts. We derived our discount rates using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing. We used discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts. Discount rates used in our reporting unit valuations ranged from 10% to 11%. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. It is reasonably possible that the judgments and estimates described above could change in future periods.

We performed our annual impairment test of goodwill as of July 1, 2017 and July 1, 2016 for all of our reporting units. Based on the results of our step one testing, the fair values of each of the reporting units exceeded their carrying values; therefore, the second step of the impairment test was not required to be performed for any of our reporting units and no goodwill impairment was recognized.

In addition to our annual impairment testing, we also test goodwill for impairment between annual impairment testing dates whenever events or circumstances occur that, in our judgment, could more likely than not reduce the fair value of one or more reporting units below its carrying amount. In assessing the possibility that a reporting unit’s fair value has been reduced below its carrying amount due to the occurrence of events or circumstances between annual impairment testing dates, we consider all available evidence, including (but not limited to) (i) the results of our impairment testing at the prior annual impairment testing date (in particular, the magnitude of the excess of fair value over carrying value observed), (ii) downward revisions to internal forecasts (and the magnitude thereof), if any, and (iii) declines in our market capitalization below our book value (and the magnitude and duration of those declines), if any. Between July 1, 2017 and December 31, 2017, we have not identified any events or circumstances that could more likely than not reduce the fair value of one or more of our reporting units below its carrying amount. However, there can be no assurances that further sustained declines in macroeconomic or business conditions affecting our industry and businesses (i) will not occur and, (ii) were they to occur, that those further sustained declines will not result in additional impairments in future periods.

As of December 31, 2017, we believe that the goodwill is recoverable for all the reporting units, however, there can be no assurances that the goodwill will not be impaired in future periods.

OTHER INTANGIBLE ASSETS

Intangible assets are comprised of the following at December 31:



	2017							2016
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Technology	$	1,177	$	(440	)	$	737	$	596	$	(371	)	$	225
Customer relationships	3,202		(819		)	2,383		1,920		(660		)	1,260
Capitalized software	1,130		(697		)	433		896		(535		)	361
Trade names and trademarks	757		(159		)	598		681		(130		)	551
Other	10		—			10		1		(1		)	—
Finite-lived intangible assets	6,276		(2,115		)	4,161		4,094		(1,697		)	2,397
Indefinite-lived intangible assets ⁽¹⁾	2,197		—			2,197		52		—			52
Total intangible assets	$	8,473	$	(2,115	)	$	6,358	$	4,146	$	(1,697	)	$	2,449


⁽¹⁾	Indefinite-lived intangible assets principally comprise trade names and trademarks acquired in business combinations.

Finite-lived intangible assets increased by $1,764 million for the year ended December 31, 2017, primarily as a result of the acquired Baker Hughes intangible assets offset by amortization during the periods (refer to "Note 3. Business Acquisition").

Indefinite-lived intangible assets increased during the year ended December 31, 2017 as a result of the acquisition of the Baker Hughes trade name which was preliminarily valued at $2,100 million using the relief-from-royalty method. Indefinite-lived intangible assets as of December 31, 2016 comprise trademarks acquired in previous years (Vetco and Bently Nevada trademarks for $42 million and $10 million, respectively).

Intangible assets are generally amortized on a straight-line basis with estimated useful lives ranging from one to 30 years. Amortization expense for the years ended December 31, 2017 and 2016 was $387 million and $239 million, respectively. We incurred additional amortization expense of $75 million during the year ended December 31, 2017 due to the acquisition of Baker Hughes.

Estimated amortization expense for each of the subsequent five fiscal years is expected to be as follows:



Year	Estimated Amortization Expense
2018	$	432
2019	398
2020	372
2021	326
2022	293