Goodwill and Intangible Assets

9 Months Ended

Jul. 31, 2014

Note 5: Goodwill and Intangible Assets

Goodwill

Goodwill allocated to HP's reportable segments as of July 31, 2014 and changes in the carrying amount of goodwill during the nine months ended July 31, 2014 are as follows:

	Personal Systems		Printing		Enterprise Group			Enterprise Services⁽²⁾		Software		HP Financial Services		Corporate Investments		Total

	In millions
Balance at beginning of period⁽¹⁾	$	2,588	$	2,591	$	16,864		$	97	$	8,840	$	144	$	—	$	31,124
Goodwill acquired during the period		—		—		—			—		12		—		—		12
Goodwill adjustments		—		—		(6	)		2		—		—		—		(4	)


Balance at end of period⁽¹⁾	$	2,588	$	2,591	$	16,858		$	99	$	8,852	$	144	$	—	$	31,132

⁽¹⁾: Goodwill at July 31, 2014 and October 31, 2013 is net of accumulated impairment losses of $14,518 million. Of that amount, $7,961 million relates to the Enterprise Services ("ES") segment, $5,744 million relates to Software, and the remaining $813 million relates to Corporate Investments.
⁽²⁾: Goodwill at July 31, 2014 and October 31, 2013 relates to the MphasiS Limited reporting unit.

Effective at the beginning of its first quarter of fiscal 2014, HP implemented certain organizational changes to align its segment financial reporting more closely with its current business structure. As a result of the organizational realignments, which are described in detail in Note 16, goodwill has been reclassified to the respective segments as of the beginning of the period using a relative fair value approach.

Goodwill is tested for impairment at the reporting unit level. At the beginning of its first quarter of fiscal 2014, HP made a change to its reporting units. In connection with continued operational synergies and interdependencies between the Enterprise Servers, Storage and Networking reporting unit and the Technology Services ("TS") reporting unit within the Enterprise Group ("EG") segment, HP combined these reporting units to create the EG reporting unit. As of July 31, 2014, HP's reporting units are consistent with the reportable segments identified in Note 16, except for ES, which includes two reporting units: MphasiS Limited; and the remainder of ES.

HP evaluates the recoverability of goodwill as of the beginning of its fourth fiscal quarter and whenever events or changes in circumstances indicate there may be a potential impairment.

Intangible Assets

HP's intangible assets are composed of:

	As of July 31, 2014										As of October 31, 2013

	Gross		Accumulated Amortization			Accumulated Impairment Loss			Net		Gross		Accumulated Amortization			Accumulated Impairment Loss			Net
	In millions
Customer contracts, customer lists and distribution agreements	$	5,302	$	(3,106	)	$	(856	)	$	1,340	$	5,321	$	(2,709	)	$	(856	)	$	1,756
Developed and core technology and patents		4,305		(1,291	)		(2,138	)		876		5,331		(1,966	)		(2,138	)		1,227
Trade name and trade marks		1,723		(270	)		(1,336	)		117		1,730		(211	)		(1,336	)		183
In-process research and development		3		—			—			3		3		—			—			3


Total intangible assets	$	11,333	$	(4,667	)	$	(4,330	)	$	2,336	$	12,385	$	(4,886	)	$	(4,330	)	$	3,169

During the first nine months of fiscal 2014, $752 million of intangible assets became fully amortized and have been eliminated from gross intangible assets and accumulated amortization. HP also eliminated gross intangible assets and accumulated amortization related to the sale of a portfolio of intellectual property in the first quarter of fiscal 2014.

Estimated future amortization expense related to finite-lived intangible assets at July 31, 2014 is as follows:

Fiscal year:	In millions

2014 (remaining 3 months)	$	226
2015		865
2016		646
2017		238
2018		146
2019		110
Thereafter		102


Total	$	2,333

- 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