XML 154 R12.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Goodwill and Other Intangible Assets, Net
 12 Months Ended
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets, Net GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
Movements in goodwill during the years ended December 31, 2017, 2018 and 2019 were as follows:
(DOLLARS IN THOUSANDS)
Goodwill
Balance at January 1, 2017
$
1,000,123

Acquisitions
87,865

Foreign exchange
32,920

Other(a)
35,380

Balance at December 31, 2017
1,156,288

Acquisitions(b)
4,253,541

Disposals
(19,069
)
Foreign exchange
(12,372
)
Balance at December 31, 2018
5,378,388

Acquisitions(c)
98,411

Frutarom measurement period adjustment
30,876

Foreign exchange
(10,079
)
Balance at December 31, 2019
$
5,497,596

_______________________ 
(a)
Other above principally represents the increase to Goodwill associated with the update of certain customer relationship assumptions in the final purchase price allocation of David Michael.
(b)
Primarily relates to the Company's acquisition of Frutarom.
(c)
Additions primarily relate to the 2019 Acquisition Activity. See Note 3 for details.
Goodwill by segment was as follows: 
 
December 31,
(DOLLARS IN THOUSANDS)
2019
 
2018
Taste
$
527,785

 
$
525,060

Scent
623,373

 
618,878

Frutarom
4,346,438

 
4,224,010

Unallocated
—

 
10,440

Total
$
5,497,596

 
$
5,378,388


The increase reflected in Scent above represents the impact of foreign currency. The increase reflected in Frutarom above primarily represents the final purchase price allocation of Frutarom as disclosed in Note 3.
The unallocated Goodwill for the year ended December 31, 2018 above represents the preliminary purchase price allocation of TAA as disclosed in Note 3 which was subsequently allocated in 2019.
Annual Goodwill Impairment Test
For the annual impairment test as of November 30, 2019, the Company assessed the fair value of the reporting units primarily using an income approach. Under the income approach, the Company determines the fair value by using a discounted cash flow method at a rate of return that reflects the relative risk of the cash flows, projecting future cash flows of each reporting unit, as well as a terminal value. The Company uses the most current actual and forecasted operating data available and key estimates and assumptions used in these valuations include revenue growth rates and profit margins based on internal forecasts, specific weighted-average cost of capital used to discount future cash flows, and historical operating trends of the Company.
There was no impairment of goodwill at any of the Company's nine reporting units in 2019. Based on the annual impairment test performed at November 30, 2019, the Company determined that IFF Legacy Reporting Units fair values exceeded their respective carrying values by over 200%, with the exception of one reporting unit that had 80% excess fair value over carrying value. In the analysis performed for the Frutarom Reporting Units, there was less than 10% excess fair value over carrying value for two reporting units. The fair values of the remaining Frutarom Reporting Units exceeded their respective carrying values by a range of approximately 10% to 55%.
For the reporting units with less than 10% excess fair value, the Savory reporting unit had excess fair value over carrying value of 8.3%, and the Taste reporting unit had excess fair value over carrying value of 7.5%. While management believes that the assumptions used in the impairment test were reasonable, changes in key assumptions, including, lower revenue growth, lower operating margin, lower terminal growth rates or increasing discount rates could result in a future impairment.
If current long-term projections for these reporting units are not realized or materially decrease, we may be required to write-off all or a portion of the goodwill. Such charge could have a material effect on the Consolidated Statements of Operations and Balance Sheets.
Using the income approach and holding other assumptions constant, the following table provides the impact on the headroom by hypothetically changing key assumptions on a standalone basis for the Company's Savory and Taste reporting units as of November 30, 2019:
 
Goodwill
 
Key Assumptions
 
Existing Headroom
 
Resulting Headroom
(DOLLARS IN MILLIONS)
 
Discount Rate
 
Terminal Growth
 
 
50 bps Increase in Discount Rate
 
50 bps Decline in Terminal Growth
Savory
$
1,205

 
7.5
%
 
3.0
%
 
8.3
%
 
(3.4
)%
 
(0.3
)%
Taste
1,662

 
7.5
%
 
3.0
%
 
7.5
%
 
(3.6
)%
 
(0.9
)%

Other Intangible Assets
Other intangible assets, net consisted of the following amounts:
 
December 31,
(DOLLARS IN THOUSANDS)
2019
 
2018
Asset Type
 
 
 
Customer relationships
$
2,653,446

 
$
2,658,659

Technological know-how
468,256

 
451,016

Trade names & patents
178,968

 
177,770

Other
40,362

 
43,766

Total carrying value
3,341,032

 
3,331,211

Accumulated Amortization
 
 
 
Customer relationships
(302,047
)
 
(156,906
)
Technological know-how
(135,269
)
 
(93,051
)
Trade names & patents
(27,213
)
 
(19,593
)
Other
(24,568
)
 
(22,339
)
Total accumulated amortization
(489,097
)
 
(291,889
)
Other intangible assets, net
$
2,851,935

 
$
3,039,322


Amortization expense was $193.1 million for the year ended December 31, 2019, and $75.9 million and $34.7 million for the years ended December 31, 2018 and 2017, respectively. Amortization expense for the next five years and thereafter, based on preliminary valuations and determinations of useful lives, is expected to be as follows:
 
December 31,
(DOLLARS IN THOUSANDS)
2020
 
2021
 
2022
 
2023
 
2024
Estimated future intangible amortization expense
$
189,896

 
$
185,510

 
$
181,698

 
$
181,586

 
$
181,586