Goodwill and intangible assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Changes in the carrying amounts of goodwill were as follows (in millions):



	Years ended December 31,
	2017		2016
Beginning balance	$	14,751	$	14,787
Goodwill related to acquisitions of businesses	—		2
Currency translation adjustments	10		(38		)
Ending balance	$	14,761	$	14,751

Other intangible assets

Other intangible assets consisted of the following (in millions):



	December 31,
	2017							2016
	Gross carrying amount		Accumulated amortization			Other intangible assets, net		Gross carrying amount		Accumulated amortization			Other intangible assets, net
Finite-lived intangible assets:
Developed product technology rights	$	12,589	$	(6,796	)	$	5,793	$	12,534	$	(5,947	)	$	6,587
Licensing rights	3,275		(1,601		)	1,674		3,275		(1,300		)	1,975
Marketing-related rights	1,319		(920		)	399		1,333		(793		)	540
R&D technology rights	1,161		(804		)	357		1,122		(704		)	418
Total finite-lived intangible assets	18,344		(10,121		)	8,223		18,264		(8,744		)	9,520
Indefinite-lived intangible assets:
IPR&D	386		—			386		759		—			759
Total other intangible assets	$	18,730	$	(10,121	)	$	8,609	$	19,023	$	(8,744	)	$	10,279

Developed product technology rights consist of rights related to marketed products acquired in business combinations. Licensing rights consist primarily of contractual rights acquired in business combinations to receive future milestones, royalties and profit sharing payments, capitalized payments to third parties for milestones related to regulatory approvals to commercialize products and up-front payments associated with royalty obligations for marketed products. Marketing-related intangible assets consist primarily of rights related to the sale and distribution of marketed products. R&D technology rights consist of technology used in R&D with alternative future uses.

IPR&D consists of R&D projects acquired in a business combination that are not complete at the time of acquisition due to remaining technological risks and/or lack of receipt of required regulatory approvals. During 2017, we decided to discontinue the internal development of AMG 899 acquired in the acquisition of Dezima in 2015 (see Note 3, Business combinations), resulting in an impairment charge of $400 million, which was recognized in Other operating expenses in the Consolidated Statement of Income and included in Other items, net in the Consolidated Statement of Cash Flows. See Note 16, Fair value measurement, for the impact on the related contingent consideration liabilities. As of December 31, 2017, IPR&D consists primarily of the oprozomib project, acquired in the acquisition of Onyx Pharmaceuticals, Inc. in 2013.

All IPR&D projects have major risks and uncertainties associated with the timely and successful completion of development and commercialization of product candidates, including our ability to confirm safety and efficacy based on data from clinical trials, our ability to obtain necessary regulatory approvals and our ability to successfully complete these tasks within budgeted costs. We are not permitted to market a human therapeutic without obtaining regulatory approvals, and such approvals require the completion of clinical trials that demonstrate that a product candidate is safe and effective. In addition, the availability and extent of coverage and reimbursement from third-party payers, including government healthcare programs and private insurance plans, as well as competitive product launches, impact the revenues a product can generate. Consequently, the eventual realized value, if any, of the acquired IPR&D projects may vary from their fair values. We review IPR&D projects for impairment annually, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable and upon the establishment of technological feasibility or regulatory approval.

During the years ended December 31, 2017, 2016 and 2015, we recognized amortization expense associated with our finite-lived intangible assets, included primarily in Cost of sales in the Consolidated Statements of Income, of $1.3 billion, $1.5 billion and $1.4 billion, respectively. The total estimated amortization expense for each of the next five years for our intangible assets is $1.2 billion, $1.1 billion, $1.1 billion, $0.9 billion and $0.9 billion in 2018, 2019, 2020, 2021 and 2022, respectively.

- 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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