Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2012

Goodwill and Intangible Assets

Goodwill and Intangible Assets

NOTE 3.  Goodwill and Intangible Assets

No acquisitions closed during the three months ended March 31, 2012. The acquisition activity in the following table includes the net impacts of adjustments to the preliminary allocation of purchase price for prior year acquisitions, which increased goodwill by $12 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, 2011 and March 31, 2012, follow:

Goodwill

	December 31, 2011		Acquisition		Translation			March 31, 2012
(Millions)	Balance		activity		and other			Balance
Industrial and Transportation	$	1,961	$	6	$	26		$	1,993
Health Care	1,514		—		5			1,519
Consumer and Office	228		6		3			237
Safety, Security and Protection Services	1,675		—		4			1,679
Display and Graphics	993		—		(8		)	985
Electro and Communications	676		—		1			677
Total Company	$	7,047	$	12	$	31		$	7,090

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.

Effective in the first quarter of 2012, 3M made certain product moves across divisions within its business segments, but none were across business segments. For any product moves that resulted in reporting unit changes, the Company applied the relative fair value method to determine the impact on goodwill of the associated reporting units. In addition, during the first quarter of 2012, 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

3M did not complete any business combinations during the three months ended March 31, 2012. As a result, balances of acquired intangible assets were primarily 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 March 31, 2012, and December 31, 2011, follow:

	March 31,			December 31,
(Millions)	2012			2011
Patents	$	564		$	561
Other amortizable intangible assets (primarily tradenames and customer related intangibles)	2,251			2,323
Total gross carrying amount	$	2,815		$	2,884
Accumulated amortization — patents	(385		)	(374		)
Accumulated amortization — other	(690		)	(717		)
Total accumulated amortization	$	(1,075	)	$	(1,091	)
Total finite-lived intangible assets — net	$	1,740		$	1,793
Non-amortizable intangible assets (tradenames)	125			123
Total intangible assets — net	$	1,865		$	1,916

Amortization expense for acquired intangible assets for the three months ended March 31, 2012 and 2011 follows:

	Three months ended
	March 31,
(Millions)	2012		2011
Amortization expense	$	58	$	54

The table below shows expected amortization expense for acquired amortizable intangible assets recorded as of March 31, 2012:

	Remainder
	of												After
	2012		2013		2014		2015		2016		2017		2017
Amortization expense	$	170	$	214	$	191	$	178	$	166	$	152	$	669

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.