Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2011

Goodwill and Intangible Assets

Goodwill and Intangible Assets

NOTE 3.  Goodwill and Intangible Assets

Purchased goodwill related to the acquisitions which closed in the first nine months of 2011 totaled $230 million, $7 million of which is deductible for tax purposes. The acquisition activity in the following table also includes the net impacts of adjustments to the preliminary allocation of purchase price for prior year acquisitions, which decreased goodwill by $2 million. The amounts in the “Translation and other” column in the following table primarily relate to changes in foreign currency exchange rates. The goodwill balance by business segment as of December 31, 2010 and September 30, 2011, follow:

Goodwill

(Millions)	Dec. 31, 2010 Balance		Acquisition activity			Translation and other		Sept. 30, 2011 Balance
Industrial and Transportation	$	1,783	$	209		$	25	$	2,017
Health Care	1,506		(1		)	28		1,533
Display and Graphics	994		4			3		1,001
Consumer and Office	187		13			5		205
Safety, Security and Protection Services	1,670		(3		)	21		1,688
Electro and Communications	680		6			10		696
Total Company	$	6,820	$	228		$	92	$	7,140

Accounting standards require that goodwill be tested for impairment annually and between annual tests in certain circumstances such as a change in reporting units or the testing of recoverability of a significant asset group within a reporting unit. At 3M, reporting units generally correspond to a division.

As discussed in Note 13, effective in the first quarter of 2011, 3M made certain product moves between its business segments, with the resulting impact reflected in the goodwill balances by business segment above for all periods presented. For any product moves that resulted in reporting unit changes, the Company applied the relative fair value method to determine the impact to reporting units. During the first quarter of 2011, the Company completed its assessment of any potential goodwill impairment for reporting units impacted by this new structure and determined that no impairment existed.

Acquired Intangible Assets

For the nine months ended September 30, 2011, intangible assets (excluding goodwill) acquired through business combinations increased balances by $284 million. Balances are also impacted by changes in foreign currency exchange rates. The carrying amount and accumulated amortization of acquired finite-lived intangible assets, in addition to the balance of non-amortizable intangible assets, as of September 30, 2011, and December 31, 2010, follow:

(Millions)	Sept. 30, 2011			Dec. 31, 2010
Patents	$	568		$	551
Other amortizable intangible assets (primarily tradenames and customer related intangibles)	2,329			2,016
Total gross carrying amount	$	2,897		$	2,567
Accumulated amortization — patents	(371		)	(345		)
Accumulated amortization — other	(700		)	(527		)
Total accumulated amortization	$	(1,071	)	$	(872	)
Total finite-lived intangible assets — net	$	1,826		$	1,695
Non-amortizable intangible assets (tradenames)	126			125
Total intangible assets — net	$	1,952		$	1,820

Amortization expense for acquired intangible assets for the three-month and nine-month periods ended September 30, 2011 and 2010 follows:

	Three months ended September 30,				Nine months ended September 30,
(Millions)	2011		2010		2011		2010
Amortization expense	$	59	$	44	$	176	$	130

The table below shows expected amortization expense for acquired amortizable intangible assets recorded as of September 30, 2011:

(Millions)	Last Quarter 2011		2012		2013		2014		2015		2016		After 2016
Amortization expense	$	59	$	223	$	212	$	189	$	177	$	164	$	802

The expected amortization expense is an estimate. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, changes in foreign currency exchange rates, impairment of intangible assets, accelerated amortization of intangible assets and other events. 3M expenses the costs incurred to renew or extend the term of intangible assets.