Acquisitions, Goodwill and Other Intangibles Assets

6 Months Ended

Jun. 30, 2015

Acquisitions, Goodwill and Intangible Assets Disclosure [Abstract]

Acquisitions, Goodwill and Other Intangible Assets

NOTE 7. ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

Acquisitions

Upon closing an acquisition, we estimate the fair values of assets and liabilities acquired and consolidate the acquisition as quickly as possible. Given the time it takes to obtain pertinent information to finalize the acquired company’s balance sheet, then to adjust the acquired company’s accounting policies, procedures, and books and records to our standards, it is often several quarters before we are able to finalize those initial fair value estimates. Accordingly, it is not uncommon for our initial estimates to be subsequently revised.

On January 30, 2015, we acquired Milestone Aviation Group (Milestone Aviation), a helicopter leasing business, for approximately $1,750 million, which is included in our GE Capital segment. The preliminary purchase price allocation resulted in goodwill of approximately $730 million and amortizable intangible assets of approximately $345 million. The allocation of the purchase price will be finalized upon completion of post-closing procedures.

During the second quarter of 2014, GE's offer to acquire the Thermal, Renewables and Grid businesses of Alstom for approximately €12,350 million (to be adjusted for the assumed net cash or liability at closing) was positively recommended by Alstom's board of directors. As part of the transaction, Alstom and the French Government signed a memorandum of understanding for the formation of three joint ventures in grid technology, renewable energy, and global nuclear and French steam power. Alstom will invest approximately €2,600 million in these joint ventures at the closing of the proposed transaction.

In the fourth quarter of 2014, Alstom completed its review of the proposed transaction with the works council and obtained approval from its shareholders. Also in the fourth quarter of 2014, GE and Alstom entered into an amendment to the original agreement where GE has agreed to pay Alstom a net amount of approximately €260 million of additional consideration at closing. In exchange for this funding, Alstom has agreed to extend the trademark licensing of the Alstom name from 5 years to 25 years as well as other contractual amendments.

In the second quarter of 2015, the European Commission indicated that it had competition concerns with the proposed transaction. In response, and while GE continues to believe the transaction is pro-competitive, GE has proposed remedies to address the Commission’s concerns while preserving the strategic and economic rationale of the proposed transaction. In addition, Alstom has agreed to contribute financially to the remedies being offered by GE through a €300 million reduction in the purchase price of the transaction. The transaction continues to remain subject to regulatory approvals and is still targeted to close in 2015.

The acquisition and alliances with Alstom will impact our Power & Water and Energy Management segments. The impact of acquired businesses on individual segments will be affected by a number of variables, including operating performance, purchase accounting impacts and expected synergies. In addition, due to the amount of time between signing and closing, the operations of the businesses may fluctuate and impact the overall valuation of the acquired businesses at the time of close and, accordingly, may affect the amounts assigned to the assets and liabilities recorded in purchase accounting.

goodwill

CHANGES IN GOODWILL BALANCES


					Dispositions,
					currency
	Balance at				exchange		Balance at
(In millions)	January 1, 2015		Acquisitions		and other		June 30, 2015

Power & Water	$	8,754	$	31	$	(159)	$	8,626
Oil & Gas		10,572		-		(214)		10,358
Energy Management		4,570		-		(272)		4,298
Aviation		8,952		-		(320)		8,632
Healthcare		17,532		-		(78)		17,454
Transportation		887		-		(17)		870
Appliances & Lighting		226		-		(9)		217
GE Capital		11,456		733		(495)		11,694
Corporate		34		-		1		35
Total	$	62,983	$	764	$	(1,563)	$	62,184

Goodwill balances decreased by $799 million in the six months ended June 30, 2015, primarily as a result of the currency exchange effects of the stronger U.S dollar, the reclassification of goodwill associated with ANZ Consumer Lending to assets of businesses held for sale and business dispositions, partially offset by the acquisition of Milestone Aviation.

As businesses meet the criteria for held for sale, we allocate goodwill to such businesses and assess the remaining reporting unit goodwill for impairment.

Our GE Capital - CLL reporting unit had a goodwill balance of $13,058 million at January 1, 2015. As a result of the GE Capital Exit Plan, we allocated $12,945 million of the GE Capital - CLL reporting unit goodwill to businesses held for sale, which is reported in discontinued operations. The remaining GE Capital - CLL goodwill was then tested for impairment using data as of April 1, 2015.

The impairment test consists of two steps: in step one, the carrying value of the reporting unit is compared with its fair value; in step two, which is applied when the carrying value of the reporting unit exceeds its fair value, the amount of goodwill impairment, if any, is derived by deducting the fair value of the reporting unit's assets and liabilities from the fair value of its equity, and comparing that amount with the carrying amount of goodwill.

We determined fair value for the GE Capital - CLL reporting unit using the market approach, which was derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable companies is based on the markets in which the GE Capital - CLL reporting unit businesses operate giving consideration to risk profiles, size, geography, and diversity of products and services.

While the carrying value of the GE Capital - CLL reporting unit was within the range of estimated fair values, we further substantiated our GE Capital - CLL goodwill balance by performing the second step analysis in which the implied fair value of goodwill exceeded its carrying value and accordingly, no goodwill impairment was recognized.

Additionally, our GE Capital - Consumer reporting unit had a goodwill balance of $9,777 million at January 1, 2015. During the first quarter of 2015, we signed an agreement to sell ANZ Consumer Lending and upon classification as held for sale, we allocated $410 million of GE Capital - Consumer reporting unit goodwill to the carrying value of the business. The remaining GE Capital - Consumer reporting unit goodwill was then tested for impairment using data as of January 1, 2015. Fair value of the GE Capital - Consumer reporting unit was determined using an income approach and incorporating market observable data. The fair value of the GE Capital - Consumer reporting unit exceeded its carrying value, and therefore, goodwill was not impaired.

Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. It is reasonably possible that the judgments and estimates described above could change in future periods.

oTHER INTANGIBLE ASSETS

OTHER INTANGIBLE ASSETS - NET

(In millions)	June 30, 2015		December 31, 2014

Intangible assets subject to amortization	$	13,544	$	13,725
Indefinite-lived intangible assets(a)		124		130
Total	$	13,668	$	13,855

(a) Indefinite-lived intangible assets principally comprise trademarks and in-process research and development.

INTANGIBLE ASSETS SUBJECT TO AMORTIZATION

	June 30, 2015						December 31, 2014
	Gross						Gross
	carrying		Accumulated				carrying		Accumulated
(in millions)	amount		amortization		Net		amount		amortization		Net

Customer-related	$	8,166	$	(2,368)	$	5,798	$	8,064	$	(2,261)	$	5,803
Patents and technology		6,455		(3,018)		3,437		6,694		(2,900)		3,794
Capitalized software		7,381		(4,198)		3,183		7,349		(4,178)		3,171
Trademarks		1,139		(280)		859		1,151		(263)		888
Lease valuations		107		(10)		97		-		-		-
Present value of future profits(a)		632		(632)		-		614		(614)		-
All other		331		(161)		170		203		(134)		69
Total	$	24,211	$	(10,667)	$	13,544	$	24,075	$	(10,350)	$	13,725

(a) Balances at June 30, 2015 and December 31, 2014 reflect adjustments of $280 million and $293 million, respectively, to the present value of future profits in our run-off insurance operation to reflect the effects that would have been recognized had the related unrealized investment securities holding gains and losses actually been realized.

Intangible assets subject to amortization decreased by $181 million in the six months ended June 30, 2015, primarily as a result of amortization and the currency exchange effects of the stronger U.S. dollar, partially offset by the acquisition of Milestone Aviation.

Consolidated amortization expense was $430 million and $397 million in the three months ended June 30, 2015 and 2014, respectively, and $858 million and $781 million the six months ended June 30, 2015 and 2014, 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.

+ References + Details