XML 73 R13.htm IDEA: XBRL DOCUMENT

Goodwill and Other Intangibles Assets

9 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

5. GOODWILL AND OTHER INTANGIBLE ASSETS

	September 30,		December 31,
(In millions)	2012		2011

Goodwill	$	27,338	$	27,230

Other intangible assets - net
Intangible assets subject to amortization	$	1,361	$	1,546

Changes in goodwill balances follow.

					Dispositions,
	Balance at				currency		Balance at
	January 1,				exchange		September 30,
(In millions)	2012		Acquisitions		and other		2012

CLL	$	13,745	$	0	$	30	$	13,775
Consumer		10,775		0		118		10,893
Real Estate		1,001		0		(40)		961
Energy Financial Services		1,562		0		0		1,562
GECAS		147		0		0		147
Total	$	27,230	$	0	$	108	$	27,338

Goodwill balances increased $108 million during the nine months ended September 30, 2012, primarily as a result of currency exchange effects of a weaker U.S. dollar ($173 million). Our reporting units and related goodwill balances are CLL ($13,775 million), Consumer ($10,893 million), Real Estate ($961 million), Energy Financial Services ($1,562 million) and GECAS ($147 million) at September 30, 2012.

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. In performing the valuations, we used cash flows that reflected management's forecasts and discount rates that included risk adjustments consistent with the current market conditions. Discount rates used in our reporting unit valuations ranged from 11.0% to 12.75%. For further information on the process we use to determine fair values for our reporting units, see Note 6 in our 2011 consolidated financial statements.

During the third quarter of 2012, we performed our annual impairment test of goodwill for all of our reporting units. Based on the results of our step one testing, the fair values of each of the CLL, Consumer, Energy Financial Services and GECAS reporting units exceeded their carrying values; therefore, the second step of the impairment test was not required to be performed and no goodwill impairment was recognized.

Our Real Estate reporting unit had a goodwill balance of $970 million at June 30, 2012. As of July 1, 2012, the carrying amount exceeded the estimated fair value of our Real Estate reporting unit by approximately $1.8 billion. The estimated fair value of the Real Estate reporting unit is based on a number of assumptions about future business performance and investment, including loss estimates for the existing finance receivable and investment portfolio, new debt origination volume and margins, and stabilization of the real estate market allowing for sales of real estate investments at normalized margins. Our assumed discount rate was 11% and was derived by applying a capital asset pricing model and corroborated using equity analyst research reports and implied cost of equity based on forecasted price to earnings per share multiples for similar companies. Given the volatility and uncertainty in the current commercial real estate environment, there is uncertainty about a number of assumptions upon which the estimated fair value is based. Different loss estimates for the existing portfolio, changes in the new debt origination volume and margin assumptions, changes in the expected pace of the commercial real estate market recovery, or changes in the equity return expectation of market participants may result in changes in the estimated fair value of the Real Estate reporting unit.

Based on the results of the step one testing, we performed the second step of the impairment test described above as of July 1, 2012. Based on the results of the second step analysis for the Real Estate reporting unit, the estimated implied fair value of goodwill exceeded the carrying value of goodwill by approximately $1.7 billion. Accordingly, no goodwill impairment was required. In the second step, unrealized losses are reflected in the fair values of an entity's assets and have the effect of reducing or eliminating the potential goodwill impairment identified in step one. The results of the second step analysis were attributable to several factors. The primary drivers were the excess of the carrying value over the estimated fair value of our Real Estate Equity Investments, which approximated $2.6 billion at that time, and the fair value premium on the Real Estate reporting unit allocated debt. The results of the second step analysis are highly sensitive to these measurements, as well as the key assumptions used in determining the estimated fair value of the Real Estate reporting unit.

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. If current conditions persist longer or deteriorate further than expected, it is reasonably possible that the judgments and estimates described above could change in future periods.

Intangible Assets Subject to Amortization

	September 30, 2012						December 31, 2011
	Gross						Gross
	carrying		Accumulated				carrying		Accumulated
(In millions)	amount		amortization		Net		amount		amortization		Net

Customer-related	$	1,204	$	(786)	$	418	$	1,186	$	(697)	$	489
Patents, licenses and
trademarks		235		(202)		33		250		(208)		42
Capitalized software		2,167		(1,722)		445		2,048		(1,597)		451
Lease valuations		1,315		(881)		434		1,470		(944)		526
Present value of
future profits (a)		524		(524)		0		491		(491)		0
All other		283		(252)		31		327		(289)		38
Total	$	5,728	$	(4,367)	$	1,361	$	5,772	$	(4,226)	$	1,546

Balances at September 30, 2012 and December 31, 2011 reflect adjustments of $359 million and $391 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 in accordance with ASC 320-10-S99-2.

Amortization related to intangible assets subject to amortization was $110 million and $147 million in the three months ended September 30, 2012 and 2011, respectively, and $344 million and $436 million in the nine months ended September 30, 2012 and 2011, respectively, and is recorded in the caption “Operating and administrative” on the Statement of Earnings.

- 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