XML 46 R24.htm IDEA: XBRL DOCUMENT v3.20.4
Goodwill and Other Intangible Assets
 12 Months Ended
Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Disclosure [Text Block] GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The following table summarizes changes in the carrying amount of goodwill by segment for the years ended December 31, 2020 and 2019, respectively.
(In millions)AgricultureCrop ProtectionSeedTotal
Balance as of December 31, 2018$10,193 $— $— $10,193 
Currency translation adjustment(28)— — (28)
Other goodwill adjustments and acquisitions1
14 — — 14 
Realignment of segments(10,179)4,726 5,453 — 
Balance as of June 1, 2019$— $4,726 $5,453 $10,179 
Currency translation adjustment— 28 32 60 
Other goodwill adjustments and acquisitions2
— (11)1 (10)
Balance as of December 31, 2019— 4,743 5,486 10,229 
Currency translation adjustment— 31 38 69 
Other goodwill adjustments and acquisitions2
— (29)— (29)
Balance as of December 31, 2020$— $4,745 $5,524 $10,269 
1.Primarily consists of the acquisition of a distributor in Greece.
2.Primarily consists of the goodwill included in the sale of businesses in the crop protection segment.

The company tests goodwill for impairment annually (during the fourth quarter), or more frequently when events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit has declined below its carrying value. As mentioned in Note 2 - Summary of Significant Accounting Policies, as a result of the Internal Reorganizations and Business Realignments, the company changed its reportable segments to seed and crop protection to reflect the manner in which the company's chief operating decision maker assesses performance and allocates resources.  The change in reportable segments resulted in changes to the company's reporting units for goodwill impairment testing to align with the level at which discrete financial information is available for review by management. The company’s reporting units include seed, crop protection and digital.

In connection with the change in reportable segments and reporting units in the second quarter of 2019, goodwill was reassigned from the former agriculture reporting unit to the seed, crop protection and digital reporting units using a relative fair value allocation approach. As a result, the company performed a goodwill impairment assessment for the former agriculture reporting unit immediately prior to the realignment and the newly created reporting units immediately after the realignment.

Additionally, during the second quarter of 2020, the company determined a triggering event had occurred as a result of changes in the company's long-term projections driven largely by the impacts of the COVID-19 pandemic on the mid-term forecasted cash flows of the business, including, but not limited to currency fluctuations, expectations of future planted area (as influenced by consumer demand, ethanol markets and government policies and regulations) and relative commodity prices, which required an interim impairment assessment for its seed and crop protection reporting units and trade name indefinite lived intangible asset. Based on the impairment analysis performed over the company’s trade name indefinite lived intangible asset it was determined that the fair value approximated the carrying value, and no impairment charge was necessary.

The company performed quantitative testing on all of its reporting units and determined that no goodwill impairments existed in 2019 and 2020.

During the third quarter of 2018, and in connection with strategic business reviews, the company assembled updated financial projections. The revised financial projections of the agriculture reporting unit assessed and quantified the impacts of developing market conditions, events and circumstances that have evolved throughout 2018, resulting in a reduction in the forecasts of sales and profitability as compared to prior forecasts. The reduction in financial projections was principally driven by lower growth in sales and margins in North America and Latin America and unfavorable currency impacts related to the Brazilian Real.  The lower growth expectation was driven by reduced planted area, an expected unfavorable shift to soybeans from corn in Latin America, and delays in expected product registrations. In addition, decreases in commodity prices and higher than anticipated industry grain inventories were expected to impact farmers’ income and buying choices resulting in shifts to lower technologies and pricing pressure. The company considered the combination of these factors and the resulting reduction in its
forecasted projections for the agriculture reporting unit and determined it was more likely than not that the fair value of the agriculture reporting unit was less than the carrying value, thus requiring the performance of an updated goodwill and intangible asset impairment analysis for the agriculture reporting unit as of September 30, 2018.

For the year ended December 31, 2018, the company performed an interim impairment analysis for the agriculture reporting unit using a discounted cash flow model (a form of the income approach), utilizing Level 3 unobservable inputs. The company’s significant estimates in this analysis included, but were not limited to, future cash flow projections, Merger-related cost and growth synergies, the weighted average cost of capital, the terminal growth rate, and the tax rate. The company believed the current assumptions and estimates utilized were both reasonable and appropriate. The key assumption driving the change in fair value was the lower financial projections discussed above. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the company’s estimates. If the company’s ongoing estimates of future cash flows are not met, the company may have to record additional impairment charges in future periods. The company’s estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and planned business strategy. These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns. Based on the analysis performed, the company determined that the carrying amount of the agriculture reporting unit exceeded its fair value resulting in a pre-tax, non-cash goodwill impairment charge of $4,503 million, reflected in goodwill impairment charge in the company’s Consolidated Statement of Operations for the year ended December 31, 2018. None of the charge was tax-deductible.

Other Intangible Assets
The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows: 
(In millions)December 31, 2020December 31, 2019
 GrossAccumulated
Amortization		NetGrossAccumulated
Amortization		Net
Intangible assets subject to amortization (Definite-lived):
      
Germplasm1
$6,265 $(317)$5,948 $6,265 $(63)$6,202 
Customer-related
1,984 (380)1,604 1,977 (268)1,709 
Developed technology1,451 (525)926 1,463 (370)1,093 
Trademarks/trade names2
2,019 (99)1,920 166 (86)80 
Favorable supply contracts
475 (302)173 475 (207)268 
Other3
405 (239)166 404 (213)191 
Total other intangible assets with finite lives
12,599 (1,862)10,737 10,750 (1,207)9,543 
Intangible assets not subject to amortization (Indefinite-lived):
      
IPR&D10 — 10 10 — 10 
Trade name2
1,871 — 1,871 
Total other intangible assets
10 — 10 1,881 — 1,881 
Total$12,609 $(1,862)$10,747 $12,631 $(1,207)$11,424 
1.Beginning on October, 1, 2019, the company changed its indefinite life assertion of germplasm assets to definite lived with a useful life of 25 years. The change is a result of a more focused development effort of new seed products coupled with an intent to out license select germplasm on a nonexclusive basis. Prior to changing the useful life of the germplasm assets, the company tested the assets for impairment under ASC 350 - Intangibles, Goodwill and Other, concluding the assets were not impaired. The increase in accumulated amortization for the year ended December 31, 2020 when compared to the year ended December 31, 2019 is due to 2020 including a full year of amortization of germplasm assets.
2.Beginning on October 1, 2020, the company changed its indefinite life assertion of its trade name asset to definite lived with a useful life of 25 years. This change is the result of the launch of BrevantTM seed in the retail channel in the U.S. Prior to changing the useful life of the trade name asset, the company tested the asset for impairment under ASC 350 - Intangibles, Goodwill and Other, concluding the asset was not impaired.
3.Primarily consists of sales and farmer networks, marketing and manufacturing alliances and noncompetition agreements.

During the third quarter of 2019, and in connection with strategic product and portfolio reviews, the company determined that the fair value of certain intangible assets classified as developed technology, other intangible assets and IPR&D within the seed segment that primarily relate to heritage DAS intangibles previously acquired from Cooperativa Central de Pesquisa Agrícola's ("Coodetec") was less than the carrying value due to the company’s focus on advancing more competitive products and eliminating redundancy and complexity across the breeding programs. For IPR&D and developed technology, the company concluded these projects were abandoned.  For other intangible assets, the company performed an impairment assessment using
the relief from royalty method (a form of the income approach) using Level 3 inputs within the fair value hierarchy. The significant assumptions used in the calculation included projected revenue, royalty rates and discount rates. These significant assumptions involve management judgment and estimates relating to future operating performance and economic conditions that may differ from actual cash flows.  As a result, the company recorded a pre-tax, non-cash intangible asset impairment charge of $54 million ($41 million after-tax), which is reflected in restructuring and asset related charges - net, in the company's Consolidated Statements of Operations for the year ended December 31, 2019.

There were no indicators of impairment for the company’s other intangible assets that would suggest that the fair value is less than its carrying value at December 31, 2019, except for IPR&D. As a result of the company’s decision, during the fourth quarter of 2019, to accelerate the ramp up of the Enlist E3TM trait platform in the company’s soybean portfolio mix across all brands over the subsequent five years with minimal use of the Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® traits thereafter for the remainder of the Roundup Ready 2 License Agreement, the company determined that certain IPR&D projects associated with Roundup Ready 2 Xtend® were not recoverable and were impaired. These IPR&D projects were either abandoned or tested for impairment using the relief from royalty method (a form of the income approach) using Level 3 inputs within the fair value hierarchy. The key assumptions used in the relief from royalty method calculation included projected revenue, royalty rates and discount rates. These key assumptions involve management judgment and estimates relating to future operating performance and economic conditions that may differ from actual cash flows. As a result, the company recorded a pre-tax, non-cash intangible asset charge of $90 million ($69 million after-tax), which is reflected in restructuring and asset related charges - net, in the company's Consolidated Statements of Operations for the year ended December 31, 2019.

During 2018, in reviewing the indefinite-lived intangible assets, the company also determined that the fair value of certain IPR&D assets had declined as a result of delays in timing of commercialization and increases to expected research and development costs. The company performed an analysis of the fair value using the relief from royalty method (a form of the income approach) using Level 3 inputs within the fair value hierarchy. The key assumptions used in the calculation included projected revenue, royalty rates and discount rates. These key assumptions involve management judgment and estimates relating to future operating performance and economic conditions that may differ from actual cash flows. As a result, the company recorded a pre-tax, non-cash intangible asset impairment charge of $85 million ($66 million after tax), which is reflected in restructuring and asset related charges - net, in the company's Consolidated Statement of Operations for the year ended December 31, 2018.

The aggregate pre-tax amortization expense from continuing operations for definite-lived intangible assets was $682 million, $475 million, and $391 million, for the year ended December 31, 2020, the year ended December 31, 2019, and the year ended December 31, 2018, respectively. Amortization expense for the year ended December 31, 2020 related to the trade name asset was $19 million (see discussion above for change in the indefinite life assertion).

The estimated annual future amortization expense related to the trade name asset is approximately $75 million per year.

Total estimated amortization expense for the next five fiscal years is as follows:
(In millions)
2021$720 
2022$698 
2023$619 
2024$605 
2025$569