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Goodwill and Intangible Assets
9 Months Ended
Sep. 30, 2017
Goodwill and Intangible Assets  
Goodwill and Intangible Assets

NOTE 3.  Goodwill and Intangible Assets

 

Purchased goodwill from acquisitions totaled $6 million during the first nine months of 2017, all 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 balances by business segment as of December 31, 2016 and September 30, 2017, follow:

 

Goodwill

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

Acquisition

 

Divestiture

 

Translation

 

September 30, 2017

 

(Millions)

    

Balance

    

activity

    

activity

    

and other

    

Balance

 

Industrial

 

$

2,536

 

$

 —

 

$

 —

 

$

128

 

$

2,664

 

Safety and Graphics

 

 

3,324

 

 

 —

 

 

(276)

 

 

98

 

 

3,146

 

Health Care

 

 

1,609

 

 

 6

 

 

 —

 

 

59

 

 

1,674

 

Electronics and Energy

 

 

1,489

 

 

 —

 

 

 —

 

 

37

 

 

1,526

 

Consumer

 

 

208

 

 

 —

 

 

 —

 

 

 3

 

 

211

 

Total Company

 

$

9,166

 

$

 6

 

$

(276)

 

$

325

 

$

9,221

 

 

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 described in Note 14, effective in the first quarter of 2017, 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 first quarter of 2017, 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

 

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, 2017, and December 31, 2016, follow:

 

 

 

 

 

 

 

 

 

 

    

September 30,

    

December 31,

 

(Millions)

    

2017

    

2016

 

Customer related intangible assets

 

$

1,924

 

$

1,939

 

Patents

 

 

586

 

 

602

 

Other technology-based intangible assets

 

 

478

 

 

524

 

Definite-lived tradenames

 

 

393

 

 

420

 

Other amortizable intangible assets

 

 

211

 

 

211

 

Total gross carrying amount

 

$

3,592

 

$

3,696

 

 

 

 

 

 

 

 

 

Accumulated amortization — customer related

 

 

(865)

 

 

(797)

 

Accumulated amortization — patents

 

 

(500)

 

 

(497)

 

Accumulated amortization — other technology based

 

 

(293)

 

 

(302)

 

Accumulated amortization — definite-lived tradenames

 

 

(238)

 

 

(236)

 

Accumulated amortization — other

 

 

(167)

 

 

(173)

 

Total accumulated amortization

 

$

(2,063)

 

$

(2,005)

 

 

 

 

 

 

 

 

 

Total finite-lived intangible assets — net

 

$

1,529

 

$

1,691

 

 

 

 

 

 

 

 

 

Non-amortizable intangible assets (primarily tradenames)

 

 

646

 

 

629

 

Total intangible assets — net

 

$

2,175

 

$

2,320

 

 

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

 

Amortization expense for acquired intangible assets for the three and nine months ended September 30, 2017 and 2016 follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three months ended 

    

Nine months ended 

 

 

 

September 30,

 

September 30,

 

(Millions)

   

2017

   

2016

   

2017

 

2016

 

Amortization expense

 

$

51

 

$

63

 

$

162

 

$

195

 

 

Expected amortization expense for acquired amortizable intangible assets recorded as of September 30, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Remainder

    

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

    

 

 

 

 

of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After

 

(Millions)

 

2017

 

2018

 

2019

 

2020

 

2021

 

2022

 

2022

 

Amortization expense

 

$

49

 

$

192

 

$

183

 

$

174

 

$

162

 

$

148

 

$

602

 

 

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. The table above excludes the impact of the carrying value of finite-lived intangible assets associated with disposal groups classified as held-for-sale at September 30, 2017. See Note 2 for additional details. 3M expenses the costs incurred to renew or extend the term of intangible assets.