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Goodwill and Intangible Assets
6 Months Ended
Jun. 30, 2012
Goodwill and Intangible Assets  
Goodwill and Intangible Assets

NOTE 3. Goodwill and Intangible Assets

 

Purchased goodwill related to the acquisition which closed during the first six months of 2012 totaled $94 million, none of which is deductible for tax purposes. 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 balances by business segment as of December 31, 2011 and June 30, 2012, follow:

 

Goodwill

  December 31, 2011 Acquisition Translation June 30, 2012
(Millions)Balanceactivityand otherBalance
Industrial and Transportation $ 1,961 $ 6 $ (9) $ 1,958
Health Care   1,514   94   (28)   1,580
Consumer and Office   228   6   2   236
Safety, Security and Protection Services   1,675     (21)   1,654
Display and Graphics   993     (11)   982
Electro and Communications   676     (17)   659
Total Company  $ 7,047 $ 106 $ (84) $ 7,069

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

 

For the six months ended June 30, 2012, intangible assets (excluding goodwill) acquired through business combinations increased balances, with this impact more than offset 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 June 30, 2012, and December 31, 2011, follow:

   June 30, December 31,
(Millions)20122011
Patents  $ 555 $ 561
Other amortizable intangible assets (primarily tradenames and customer related      
 intangibles)    2,280   2,323
Total gross carrying amount  $ 2,835 $ 2,884
        
Accumulated amortization — patents    (385)   (374)
Accumulated amortization — other    (729)   (717)
Total accumulated amortization  $ (1,114) $ (1,091)
        
 Total finite-lived intangible assets — net  $ 1,721 $ 1,793
        
Non-amortizable intangible assets (tradenames)   121   123
 Total intangible assets — net $ 1,842 $ 1,916

Amortization expense for acquired intangible assets for the three-month and six-month periods ended June 30, 2012 and 2011 follows:
             
  Three months ended Six months ended
  June 30, June 30,
(Millions) 2012 2011 2012 2011
Amortization expense  $ 58 $ 63 $ 116 $ 117

The table below shows expected amortization expense for acquired amortizable intangible assets recorded as of June 30, 2012:
  Remainder                 
of            After
2012201320142015201620172017
Amortization expense $ 115 $ 216 $ 193 $ 180 $ 167 $ 154 $ 696

The expected amortization expense is an estimate. Actual amounts of amortization expense may differ from estimated amounts due to 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.