Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2015

NOTE 3. Goodwill and Intangible Assets

Purchased goodwill from acquisitions totaled $2.5 billion in 2015, $636 million of which is deductible for tax purposes. Purchased goodwill from acquisitions totaled $65 million in 2014, none of which is deductible for tax purposes. 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


	Dec. 31,		2014		2014		Dec. 31,		2015		2015		Dec. 31,
	2013		acquisition		translation		2014		acquisition		translation		2015
(Millions)	Balance		activity		and other		Balance		activity		and other		Balance
Industrial	$	2,171	$	—	$	(129)	$	2,042	$	637	$	(106)	$	2,573
Safety and Graphics		1,740		—		(90)		1,650		1,764		(72)		3,342
Health Care		1,596		65		(72)		1,589		94		(59)		1,624
Electronics and Energy		1,607		—		(53)		1,554		—		(44)		1,510
Consumer		231		—		(16)		215		—		(15)		200
Total Company	$	7,345	$	65	$	(360)	$	7,050	$	2,495	$	(296)	$	9,249

As described in Note 16, effective in the third quarter of 2015, within the Health Care business segment, the Company formed the Oral Care Solutions Division, which combined the former 3M ESPE and 3M Unitek divisions. As also described in Note 16, effective in the first quarter of 2016, the Company changed its business segment reporting in its continuing effort to improve the alignment of its businesses around markets and customers. For any product changes 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. During the third quarter of 2015 and the first quarter of 2016, the Company completed its assessment of any potential goodwill impairment for reporting units impacted by these changes and determined that no impairment existed. The Company also completed its annual goodwill impairment test in the fourth quarter of 2015 for all reporting units and determined that no impairment existed. In addition, the Company had no impairments of goodwill in prior years.

Acquired Intangible Assets

For 2015, the intangible assets (excluding goodwill) acquired through business combinations increased the gross carrying amount. 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)	2015		2014
Customer related intangible assets	$	1,973	$	1,348
Patents		616		581
Other technology-based intangible assets		525		407
Definite-lived tradenames		421		401
Other amortizable intangible assets		216		221
Total gross carrying amount	$	3,751	$	2,958

Accumulated amortization — customer related		(668)		(597)
Accumulated amortization — patents		(481)		(472)
Accumulated amortization — other technology based		(252)		(215)
Accumulated amortization — definite-lived tradenames		(215)		(195)
Accumulated amortization — other		(169)		(167)
Total accumulated amortization	$	(1,785)	$	(1,646)

Total finite-lived intangible assets — net	$	1,966	$	1,312

Non-amortizable intangible assets (primarily tradenames)		635		123
Total intangible assets — net	$	2,601	$	1,435

Certain tradenames acquired by 3M are not amortized because they have been in existence for over 55 years, have a history of leading-market share positions, have been and are intended to be continuously renewed, and the associated products of which are expected to generate cash flows for 3M for an indefinite period of time.

Amortization expense for the years ended December 31 follows:


(Millions)	2015		2014		2013
Amortization expense	$	229	$	228	$	236

Expected amortization expense for acquired amortizable intangible assets recorded as of December 31, 2015 follows:



											After
(Millions)	2016		2017		2018		2019		2020		2020
Amortization expense	$	252	$	226	$	205	$	192	$	183	$	908

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.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details