GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS

12 Months Ended

May 25, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS

The change in the carrying amount of goodwill for fiscal 2014 and 2013 was as follows:



	Consumer Foods			Commercial Foods		Private Brands			Total
Balance as of May 27, 2012	$	3,162.1		$	525.0	$	321.7		$	4,008.8
Acquisitions	612.2			347.8		3,473.2			4,433.2
Currency translation and purchase accounting adjustments	(13.8		)	0.2		(1.7		)	(15.3		)
Balance as of May 26, 2013	$	3,760.5		$	873.0	$	3,793.2		$	8,426.7
Impairment	—			—		(602.2		)	(602.2		)
Currency translation and purchase accounting adjustments	(12.0		)	0.4		23.6			12.0
Balance as of May 25, 2014	$	3,748.5		$	873.4	$	3,214.6		$	7,836.5

Other identifiable intangible assets were as follows:



	2014				2013
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Non-amortizing intangible assets	$	1,059.5	$	—	$	1,139.7	$	—
Amortizing intangible assets	2,377.1		230.8		2,385.9		122.0
	$	3,436.6	$	230.8	$	3,525.6	$	122.0

We implemented organizational changes during the second quarter of fiscal 2014 that resulted in new reporting segments. As a result, we reassigned goodwill to the new reporting units using a relative fair value allocation approach and performed a goodwill impairment analysis, which did not identify any potential impairments.

In the fourth quarter of fiscal 2014, in conjunction with our annual review for impairment, we performed a qualitative analysis of goodwill for each of the reporting units in our segments. Because sales and profits for Private Brands continued to fall below our expectations throughout fiscal 2014 and following preparation of plans for the business for fiscal 2015, we performed a quantitative analysis of goodwill of our Private Brands segment. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans and future industry and economic conditions. We estimated the future cash flows of each reporting unit within the Private Brands segment and calculated the net present value of those estimated cash flows using a risk adjusted discount rate, in order to estimate the fair value of each reporting unit from the perspective of a market participant. We used discount rates and terminal growth rates of approximately 8.3% and 3%, respectively, to calculate the present value of estimated future cash flows. We then compared the estimated fair value of each reporting unit to the respective historical carrying value (including allocated assets and liabilities of certain shared and Corporate functions), and determined that the fair value of the reporting unit was less than the carrying value for five of our reporting units within the Private Brands segment. With the assistance of a third-party valuation specialist, we estimated the fair value of the assets and liabilities of each of these reporting units, in order to determine the implied fair value of goodwill of each reporting unit. We recognized impairment charges for the difference between the implied fair value of goodwill and the historical carrying value of goodwill within each reporting unit. Accordingly, during the fourth quarter of fiscal 2014, we recorded a $602.2 million charge for the impairment of goodwill. The following reporting units within Private Brands were impacted: $66.4 million in Bars and Coordinated, $154.6 million in Cereal, $94.2 million in Pasta, $231.6 million in Snacks, and $55.4 million in Retail Bakery.

In the case of three of our reporting units within the Private Brands segment; Pasta, Snacks, and Retail Bakery, the estimated fair value of certain amortizing intangible assets (customer relationships) used in step two of our impairment analysis was substantially less than the carrying value of those assets and, as a result, the carrying value of the Pasta, Snacks, and Retail Bakery reporting units exceeded the estimated fair values of those reporting units, even after the previously described goodwill impairment charges were recorded. The carrying value of the Private Brands amortizing intangible assets are expected to be recovered over their remaining lives (on an undiscounted basis) and, accordingly, no impairments were required to be recognized.

Following the impairment charges recorded in fiscal 2014, the carrying value of goodwill in our Private Brands reporting units included $328.7 million for Bars and Coordinated, $464.4 million for Cereal, $752.1 million for Pasta, $816.2 million for Snacks, $717.1 million for Retail Bakery, and $136.1 million for Condiments. If the future performance of one or more of the reporting units within the Private Brands segment falls short of our expectations or if there are significant changes in risk-adjusted discount rates due to changes in market conditions, we could be required to recognize additional, material impairment charges in future periods.

In fiscal 2014, we also elected to perform a quantitative impairment test for non-amortizing intangible assets, which are comprised of brands and trademarks. We recognized impairment charges of $72.5 million in our Consumer Foods segment, primarily for our Chef Boyardee^® brand and a $3.2 million impairment charge in our Private Brands segment for two small brands. We also recognized a $3.2 million impairment charge for an amortizable technology license in Corporate expenses in fiscal 2014.

In the fourth quarter of fiscal 2014, we completed the sale of Medallion Foods within the Private Brands segment. Related allocated goodwill and amortizing intangible assets of $17.5 million and $14.4 million , respectively, were reclassified to noncurrent assets held for sale. During fiscal 2014, we recognized impairments of $17.5 million and $7.9 million, of the allocated goodwill and amortizing intangible assets, respectively, which are reflected in discontinued operations.

Amortizing intangible assets, carrying a weighted average life of approximately 23 years, are principally composed of customer relationships, licensing arrangements, and intellectual property. For fiscal 2014, 2013, and 2012, we recognized amortization expense of $111.4 million, $55.7 million, and $20.8 million, respectively. Based on amortizing assets recognized in our Consolidated Balance Sheet as of May 25, 2014, amortization expense is estimated to average $108.5 million for each of the next five years, with a high expense of $109.2 million in fiscal year 2015 and decreasing to a low expense of $107.0 million in fiscal year 2019.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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