Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2011

Goodwill and Intangible Assets

Goodwill and Intangible Assets

NOTE 3.  Goodwill and Intangible Assets

Purchased goodwill from acquisitions totaled $255 million in 2011, $7 million of which is deductible for tax purposes. Purchased goodwill from acquisitions totaled $978 million in 2010, $1 million of which is deductible for tax purposes. The acquisition activity in the following table also includes the net impact of adjustments to the preliminary allocation of purchase price for prior year acquisitions, which increased goodwill by $4 million in 2011 and increased goodwill by $2 million in 2010. 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 follows:

Goodwill

(Millions)	Dec. 31, 2009 Balance		2010 acquisition activity		2010 translation and other			Dec. 31, 2010 Balance		2011 acquisition activity			2011 translation and other			Dec. 31, 2011 Balance
Industrial and Transportation	$	1,757	$	8	$	18		$	1,783	$	205		$	(27	)	$	1,961
Health Care	1,007		520		(21		)	1,506		3			5			1,514
Consumer and Office	155		24		8			187		42			(1		)	228
Safety, Security and Protection Services	1,220		428		22			1,670		(1		)	6			1,675
Display and Graphics	990		—		4			994		4			(5		)	993
Electro and Communications	703		—		(23		)	680		6			(10		)	676
Total Company	$	5,832	$	980	$	8		$	6,820	$	259		$	(32	)	$	7,047

As discussed in Note 17 to the Consolidated Financial Statements, 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 those changes 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. The Company also completed its annual goodwill impairment test in the fourth quarter of 2011 for all reporting units and determined that no impairment existed. In addition, the Company had no impairments of goodwill in prior years.

As discussed in Note 13, in June 2009, 3M tested the long lived assets grouping associated with the U.K. passport production activity of 3M’s Security Systems Division for recoverability. This circumstance required the Company to also test goodwill for impairment at the reporting unit (Security Systems Division) level. 3M completed its assessment of potential goodwill impairment for this reporting unit and determined that no goodwill impairment existed as of June 30, 2009.

Acquired Intangible Assets

For 2011, intangible assets (excluding goodwill) acquired through business combinations increased the gross carrying amount by $342 million. Balances are also impacted by changes in foreign currency exchange rates. The gross carrying amount and accumulated amortization of acquired intangible assets as of December 31 follow:

(Millions)	2011			2010
Patents	$	561		$	551
Other amortizable intangible assets (primarily tradenames and customer-related intangibles)	2,323			2,016
Non-amortizable intangible assets (tradenames)	123			125
Total gross carrying amount	$	3,007		$	2,692
Accumulated amortization — patents	(374		)	(345		)
Accumulated amortization — other	(717		)	(527		)
Total accumulated amortization	(1,091		)	(872		)
Total intangible assets — net	$	1,916		$	1,820

3M has certain tradenames that are not amortized because of the long-time established name recognition in their respective industries.

Amortization expense for the years ended December 31 follows:

(Millions)	2011		2010		2009
Amortization expense	$	235	$	176	$	181

Expected amortization expense for acquired amortizable intangible assets recorded as of December 31, 2011 follows:

(Millions)	2012		2013		2014		2015		2016		After 2016
Amortization expense	$	225	$	214	$	191	$	178	$	165	$	820

The preceding 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.