Goodwill and Other Intangibles Assets

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

NOTe 6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

CHANGES IN GOODWILL BALANCES

	2014								2013
					Dispositions,								Dispositions,
					currency								currency
	Balance at				exchange		Balance at		Balance at				exchange		Balance at
(In millions)	January 1		Acquisitions		and other		December 31		January 1		Acquisitions		and other		December 31

CLL	$	13,522	$	-	$	(464)	$	13,058	$	13,454	$	3	$	65	$	13,522
Consumer		10,277		-		(500)		9,777		10,882		14		(619)		10,277
Real Estate		742		-		(205)		537		926		-		(184)		742
Energy Financial Services		1,507		-		-		1,507		1,562		-		(55)		1,507
GECAS		147		-		-		147		147		-		-		147
Total	$	26,195	$	-	$	(1,169)	$	25,026	$	26,971	$	17	$	(793)	$	26,195

Goodwill balances decreased $(1,169) million in 2014, primarily as a result of currency exchange effects of a stronger U.S. dollar, the sale of GEMB-Nordic and other dispositions and a reclassification of goodwill associated with Budapest Bank to assets of businesses held for sale.

Goodwill balances decreased $(776) million in 2013, primarily as a result of dispositions.

We test goodwill for impairment annually in the third quarter of each year using data as of July 1 of that year. 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 is more than 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 values for each of the reporting units using an income approach. For our Consumer reporting unit, we incorporated market observable data in determining fair value. When available and appropriate, we use comparative market multiples to corroborate discounted cash flow results. We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation.

Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business. Actual results may differ from those assumed in our forecasts. We derive our discount rates using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing. We use discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts. Discount rates used in our reporting unit valuations ranged from 10.5% to 13.3%.

During the third quarter of 2014, we performed our annual impairment test of goodwill for all of our reporting units (i.e., CLL, Consumer, Real Estate, Energy Financial Services and GECAS). Based on the results of our step one testing, the fair values of each of the GECC reporting units exceeded their carrying values; therefore, the second step of the impairment test was not required to be performed for any of our reporting units and no goodwill impairment was recognized.

In 2013, while the Real Estate reporting unit’s book value was within the range of its fair value, we further substantiated our Real Estate goodwill balance by performing the second step analysis in which the implied fair value of goodwill exceeded its carrying value by approximately $3.7 billion. In the current year, it was determined that the second step was not required as the results of step one indicated that the fair value of the Real Estate reporting unit exceeded its book value.

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

INTANGIBLE ASSETS SUBJECT TO AMORTIZATION

	2014						2013
	Gross						Gross
	carrying		Accumulated				carrying		Accumulated
December 31 (In millions)	amount		amortization		Net		amount		amortization		Net

Capitalized software	$	2,148	$	(1,638)	$	510	$	2,200	$	(1,707)	$	493
Customer-related		1,345		(844)		501		1,173		(802)		371
Lease valuations		485		(377)		108		703		(498)		205
Present value of future profits(a)		614		(614)		-		574		(574)		-
Patents and technology		87		(83)		4		106		(102)		4
Trademarks		30		(20)		10		49		(36)		13
All other		434		(391)		43		326		(276)		50
Total	$	5,143	$	(3,967)	$	1,176	$	5,131	$	(3,995)	$	1,136

(a) Balances at December 31, 2014 and 2013 reflect adjustments of $293 million and $322 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.

During 2014, we recorded additions to intangible assets subject to amortization of $353 million. The components of finite-lived intangible assets acquired during 2014 and their respective weighted average amortizable period follow.

COMPONENTS OF FINITE-LIVED INTANGIBLE ASSETS ACQUIRED DURING 2014
			Weighted-average
	Gross		amortizable period
(In millions)	carrying value		(in years)

Customer-related	$	264		7.6
Capitalized software		88		6.7
Lease valuations		1		7.0

Amortization expense related to intangible assets subject to amortization was $403 million, $425 million and $447 million in 2014, 2013 and 2012, respectively, and is recorded in operating and administrative expense on the financial statements. Estimated annual pre-tax amortization for intangible assets over the next five calendar years follows.

ESTIMATED 5 YEAR CONSOLIDATED AMORTIZATION

(In millions)		2015		2016		2017		2018		2019

Estimated annual pre-tax amortization	$	355	$	296	$	225	$	146	$	123

- 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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