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GOODWILL AND OTHER INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2019

GOODWILL AND OTHER INTANGIBLE ASSETS

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. The Company’s reporting units are its operating segments.

During the second quarter of 2019, the Company completed its annual assessment for goodwill impairment across its eleven reporting units through a quantitative analysis, utilizing a discounted cash flow approach, which incorporates assumptions regarding future growth rates, terminal values, and discount rates. The two-step quantitative process involved comparing the estimated fair value of each reporting unit to the reporting unit’s carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is considered not to be impaired, and the second step of the impairment test is unnecessary. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test would be performed to measure the amount of impairment loss to be recorded, if any. The Company’s goodwill impairment assessment for 2019 indicated the estimated fair value of each of its reporting units exceeded its carrying amount by a significant margin.

If circumstances change significantly, the Company would also test a reporting unit’s goodwill for impairment during interim periods between its annual tests. There has been no impairment of goodwill in any of the years presented.

The changes in the carrying amount of goodwill for each of the Company's reportable segments during the six months ended June 30, 2019 were as follows:

Global

(millions)

Industrial

Institutional

Energy

Other

Total

December 31, 2018

$2,730.8

$1,015.3

$3,126.6

$205.3

$7,078.0

Current year business combinations (a)

93.2

86.8

0.7

180.7

Prior year business combinations (b)

(0.2)

Effect of foreign currency translation

(9.5)

(3.7)

(10.5)

(0.7)

(24.4)

June 30, 2019

$2,814.3

$1,098.4

$3,116.1

$205.3

$7,234.1

(a)	Represents goodwill associated with current year acquisitions. The Company expects $0.7 million of the goodwill related to businesses acquired to be tax deductible.

(b)	Represents the purchase price allocation adjustments for acquisitions deemed preliminary as of the end of the prior year.

Other Intangible Assets

The Nalco trade name is the Company’s principal indefinite life intangible asset. During the second quarter of 2019, the Company completed its annual test for indefinite life intangible asset impairment using a relief from royalty method of assessment, which incorporates assumptions regarding future sales projections, royalty rate and discount rates. Based on this testing, the estimated fair value of the asset exceeded its carrying value by a significant margin; therefore, no adjustment to the $1.2 billion carrying value of this asset was necessary. There has been no impairment of the Nalco trade name intangible since it was acquired.

The Company’s intangible assets subject to amortization primarily include customer relationships, trademarks, patents and other technology. The fair value of identifiable intangible assets is estimated based upon discounted future cash flow projections and other acceptable valuation methods. Other intangible assets are amortized on a straight-line basis over their estimated economic lives. Total amortization expense related to other intangible assets during the second quarter of 2019 and 2018 was $80.7 million and $80.1 million, respectively. Total amortization expense related to other intangible assets during the first six months of 2019 and 2018 was $160.5 million and $160.3 million, respectively. Estimated amortization for the remaining six month period of 2019 related to other amortizable intangible assets is expected to be approximately $161 million.