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Intangible Assets and Goodwill
9 Months Ended
Sep. 30, 2011
Intangible Assets and Goodwill 
Intangible Assets and Goodwill

7.                                      Intangible Assets and Goodwill

 

A.  Intangible assets

 

Intangible assets are comprised of the following:

 

 

 

 

 

September 30, 2011

 

(Millions of dollars)

 

Weighted
Amortizable
Life (Years)

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net

 

Customer relationships

 

15

 

$2,929

 

$(173)

 

$2,756

 

Intellectual property

 

12

 

1,775

 

(208)

 

1,567

 

Other

 

11

 

277

 

(89)

 

188

 

Total finite-lived intangible assets

 

14

 

4,981

 

(470)

 

4,511

 

Indefinite-lived intangible assets - In-process research & development

 

 

 

18

 

 

18

 

Total intangible assets

 

 

 

$4,999

 

$(470)

 

$4,529

 

 

 

 

 

 

December 31, 2010

 

(Millions of dollars)

 

Weighted
Amortizable
Life (Years)

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net

 

Customer relationships

 

17

 

$630

 

$(108)

 

$522

 

Intellectual property

 

9

 

306

 

(166)

 

140

 

Other

 

13

 

197

 

(72)

 

125

 

Total finite-lived intangible assets

 

14

 

1,133

 

(346)

 

787

 

Indefinite-lived intangible assets - In-process research & development

 

 

 

18

 

 

18

 

Total intangible assets

 

 

 

$1,151

 

$(346)

 

$805

 

 

 

 

 

 

 

 

 

 

 

 

During the third quarter of 2011, we acquired finite-lived intangible assets aggregating $3,941 million due to purchases of Bucyrus International, Inc. and Pyroban Group Ltd.  See Note 18 for details on these business combinations.

 

Amortization expense for the three and nine months ended September 30, 2011 was $91 million and $135 million, respectively.  Amortization expense for the three and nine months ended September 30, 2010 was $20 million and $52 million, respectively.  Amortization expense related to intangible assets is expected to be:

 

(Millions of dollars)

2011

 

2012

 

2013

 

2014

 

2015

 

Thereafter

 

$229

 

$376

 

$368

 

$365

 

$360

 

$2,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B.  Goodwill

 

During the third quarter of 2011, we recorded goodwill of $5,286 million related to the acquisitions of Bucyrus International, Inc. and Pyroban Group Ltd.  See Note 18 for details on these business combinations.

 

We test goodwill for impairment annually and whenever events or circumstances make it more likely than not that an impairment may have occurred.  We perform our annual goodwill impairment test as of October 1 and monitor for interim triggering events on an ongoing basis.  Goodwill is reviewed for impairment utilizing a two-step process.  The first step requires us to compare the fair value of each reporting unit, which we primarily determine using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill.  If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired.  If the carrying value is greater than the fair value, there is an indication that an impairment may exist and the second step is required.  Additionally, if the carrying amount of a reporting unit is zero or negative, the second step of the goodwill impairment test is also required if an analysis of qualitative factors indicates it more likely than not that a goodwill impairment exists.  In step two, the implied fair value of goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities.  If the implied fair value of goodwill is less than the carrying value of the reporting unit’s goodwill, the difference is recognized as an impairment loss.  No goodwill was impaired during the three and nine months ended September 30, 2011 or 2010.

 

As discussed in Note 14 – Segment Information, during the first quarter of 2011, we revised our reportable segments in line with the changes to our organizational structure that were announced during 2010.  Our reporting units did not change as a result of the changes to our reportable segments.

 

The changes in the carrying amount of the goodwill by reportable segment for the nine months ended September 30, 2011 were as follows: 

 

(Millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction
Industries

 

Resource
Industries

 

Power
Systems

 

Other

 

Consolidated
Total

 

Balance at December 31, 2010

 

$357

 

$51

 

$2,077

 

$129

 

$2,614

 

Business acquisitions1

 

 

5,263

 

23

 

 

5,286

 

Business divestitures2

 

 

 

 

(12)

 

(12)

 

Other adjustments3

 

24

 

(133)

 

(1)

 

 

(110)

 

Balance at September 30, 2011

 

$381

 

$5,181

 

$2,099

 

$117

 

$7,778

 

 

Purchase of Bucyrus International, Inc. and Pyroban Group Ltd.  See Note 18 for additional details.

Sale of Carter Machinery.  See Note 18 for additional details.

 

Other adjustments are comprised primarily of foreign currency translation.