Intangible Assets Including Goodwill |
NOTE N. INTANGIBLE ASSETS INCLUDING GOODWILL Intangible Assets The following table presents the company’s intangible asset balances by major asset class: | | | | | | | | | | | ($ in millions) | | | | | | | | | | | | | Gross Carrying | | Accumulated | | Net Carrying | | At December 31, 2020: | | Amount | | Amortization | | Amount | * | Intangible asset class | | | | | | | | | | | Capitalized software | | $ | 1,777 | | $ | (814) | | $ | 963 | | Client relationships | | | 8,838 | | | (2,056) | | | 6,783 | | Completed technology | | | 5,957 | | | (1,671) | | | 4,286 | | Patents/trademarks | | | 2,246 | | | (499) | | | 1,747 | | Other** | | | 56 | | | (39) | | | 16 | | Total | | $ | 18,874 | | $ | (5,079) | | $ | 13,796 | | | | | | | | | | | | |
* | Includes an increase in net intangible asset balance of $279 million due to foreign currency translation. |
** | Other intangibles are primarily acquired proprietary and nonproprietary business processes, methodologies and systems. |
| | | | | | | | | | | ($ in millions) | | | | | | | | | | | | | Gross Carrying | | Accumulated | | Net Carrying | | At December 31, 2019: | | Amount | | Amortization | | Amount | * | Intangible asset class | | | | | | | | | | | Capitalized software | | $ | 1,749 | | $ | (743) | | $ | 1,006 | | Client relationships | | | 8,921 | | | (1,433) | | | 7,488 | | Completed technology | | | 6,261 | | | (1,400) | | | 4,861 | | Patents/trademarks | | | 2,301 | | | (445) | | | 1,856 | | Other** | | | 56 | | | (31) | | | 24 | | Total | | $ | 19,287 | | $ | (4,052) | | $ | 15,235 | | | | | | | | | | | | |
* | Includes a decrease in net intangible asset balance of $42 million due to foreign currency translation. |
** | Other intangibles are primarily acquired proprietary and nonproprietary business processes, methodologies and systems. |
There was no impairment of intangible assets recorded in 2020 and 2019. The net carrying amount of intangible assets decreased $1,439 million during the year ended December 31, 2020, primarily due to intangible asset amortization, partially offset by additions of capitalized software. The aggregate intangible amortization expense was $2,468 million and $1,850 million for the years ended December 31, 2020 and 2019, respectively. The increase in intangible amortization expense during 2020 was primarily due to an increase in the gross carrying amount of intangible assets from the Red Hat acquisition which closed in the third quarter of 2019. In addition, in 2020 and 2019, respectively, the company retired $1,483 million and $946 million of fully amortized intangible assets, impacting both the gross carrying amount and accumulated amortization by this amount. The future amortization expense relating to intangible assets currently recorded in the Consolidated Balance Sheet is estimated to be the following at December 31, 2020: | | | | | | | | | | | | Capitalized | | Acquired | | | | ($ in millions) | | Software | | Intangibles | | Total | 2021 | | $ | 544 | | $ | 1,809 | | $ | 2,353 | 2022 | | | 305 | | | 1,746 | | | 2,051 | 2023 | | | 114 | | | 1,432 | | | 1,546 | 2024 | | | 0 | | | 1,382 | | | 1,383 | 2025 | | | — | | | 1,364 | | | 1,364 | Thereafter | | | — | | | 5,099 | | | 5,099 | | | | | | | | | | |
Goodwill The changes in the goodwill balances by reportable segment, for the years ended December 31, 2020 and 2019, are as follows: | | | | | | | | | | | | | | | | | | | | ($ in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign | | | | | | | | | | | | | | | | | | | Currency | | | | | | | | | | | | Purchase | | | | | Translation | | | | | | Balance at | | Goodwill | | Price | | | | | and Other | | Balance at | | Segment | | January 1, 2020 | | Additions | | Adjustments | | Divestitures | | Adjustments | ** | December 31, 2020 | | Cloud & Cognitive Software | | $ | 43,037 | | $ | 362 | | $ | (139) | | $ | — | | $ | 675 | | $ | 43,934 | | Global Business Services | | | 5,775 | | | 205 | | | — | | | — | | | 165 | | | 6,145 | | Global Technology Services | | | 7,141 | | | — | | | — | | | — | | | 104 | | | 7,245 | | Systems | | | 2,270 | | | 8 | | | — | | | — | | | 15 | | | 2,293 | | Total | | $ | 58,222 | | $ | 575 | | $ | (139) | | $ | — | | $ | 960 | | $ | 59,617 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | ($ in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign | | | | | | | | | | | | | | | | | | | Currency | | | | | | | | | | | | Purchase | | | | | Translation | | | | | | Balance at | | Goodwill | | Price | | | | | and Other | | Balance at | | Segment | | January 1, 2019 | | Additions | | Adjustments | | Divestitures | | Adjustments | ** | December 31, 2019 | | Cloud & Cognitive Software* | | $ | 24,463 | | $ | 18,399 | | $ | 133 | | $ | — | | $ | 41 | | $ | 43,037 | | Global Business Services | | | 4,711 | | | 1,059 | | | 1 | | | (1) | | | 5 | | | 5,775 | | Global Technology Services | | | 3,988 | | | 3,119 | | | — | | | — | | | 34 | | | 7,141 | | Systems | | | 1,847 | | | 525 | | | (110) | | | — | | | 7 | | | 2,270 | | Other—divested businesses* | | | 1,256 | | | — | | | — | | | (1,256) | | | — | | | — | | Total | | $ | 36,265 | | $ | 23,102 | | $ | 24 | | $ | (1,257) | | $ | 87 | | $ | 58,222 | | | | | | | | | | | | | | | | | | | | | |
* | Recast to conform to 2020 presentation. |
** | Primarily driven by foreign currency translation. |
There were no goodwill impairment losses recorded during 2020 or 2019 and the company has no accumulated impairment losses. Purchase price adjustments recorded in 2020 and 2019 were related to acquisitions that were still subject to the measurement period that ends at the earlier of 12 months from the acquisition date or when information becomes available. During 2020, net purchase price adjustments recorded to noncurrent tax assets and liabilities were related to the Red Hat acquisition. Net purchase price adjustments recorded in 2019 were not material.
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