Goodwill and Identifiable Intangibles

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Identifiable Intangible Assets

10. Goodwill and Identifiable Intangible Assets

Goodwill

Changes in the net carrying amount of goodwill by segment were as follows:

(in millions)	ACCO Brands North America		ACCO Brands EMEA		ACCO Brands International			Total
Balance at December 31, 2017	$	375.6	$	129.4	$	165.3		$	670.3
Acquisitions(1)	—		—		2.4			2.4
Foreign currency translation	—		36.2		—			36.2
Balance at December 31, 2018	375.6		165.6		167.7			708.9
Acquisitions(1)	—		—		10.1			10.1
Foreign currency translation	—		0.1		(0.5		)	(0.4		)
Balance at December 31, 2019	$	375.6	$	165.7	$	177.3		$	718.6

(1) Goodwill has been recorded on our Consolidated Balance Sheet related to the GOBA Acquisition and represents the excess of the cost of the GOBA Acquisition when compared to the fair value estimate of the net assets acquired on July 2, 2018 (the date of the GOBA Acquisition). Goodwill has been recorded on our Consolidated Balance Sheet related to the Foroni Acquisition and represents the excess of the cost of the Foroni Acquisition when compared to the fair value estimate of the net assets acquired on August 1, 2019 (the effective date of the Foroni Acquisition). See "Note 3. Acquisitions" for details on the calculation of the goodwill acquired in the acquisitions.

The goodwill balance includes $215.1 million of accumulated impairment losses, which occurred prior to December 31, 2016.

The authoritative guidance on goodwill and other intangible assets requires that goodwill be tested for impairment at a reporting unit level. We have determined that our reporting units are ACCO Brands North America, ACCO Brands EMEA and ACCO Brands International. We test goodwill for impairment at least annually and on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. The Company performed this annual assessment, on a qualitative basis, as allowed by GAAP, in the second quarter of 2019 and concluded that no impairment existed.

A considerable amount of management judgment and assumptions are required in performing the impairment tests, principally in determining the fair value of each reporting unit and the indefinite lived intangible assets. While we believe our judgments and assumptions are reasonable, different assumptions could change the estimated fair values and, therefore, impairment charges could be required. Significant negative industry or economic trends, disruptions to our business, loss of significant customers, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in the use of the assets or in entity structure, and divestitures may adversely impact the assumptions used in the valuations and ultimately result in future impairment charges.

Identifiable Intangibles

We test indefinite-lived intangibles for impairment at least annually and on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. We performed this annual assessment, on a qualitative basis, as allowed by GAAP, for our indefinite-lived trade names in the second quarter of 2019 and concluded that no impairment existed. For one of our indefinite-lived trade names that was not substantially above its carrying value, Mead^®, we performed a quantitative test in the second quarter of 2018. A 1.5% long-term growth and an 11.5% discount rate were used. We concluded that the Mead^® trade name was not impaired.

Acquired Identifiable Intangibles

Foroni Acquisition

The preliminary valuation of identifiable intangible assets of $11.1 million acquired in the Foroni Acquisition includes an amortizable trade name, "Foroni^®," which has been recorded at its estimated fair value. The fair value of the trade name was determined using the relief from royalty method, which is based on the present value of royalty fees derived from projected revenues. The Foroni^® trade name is expected to be amortized over 23 years on a straight-line basis.

Cumberland Asset Acquisition

The valuation of identifiable intangible assets of $3.2 million acquired in the Cumberland Asset Acquisition includes an amortizable trade name and amortizable customer relationships, which have been recorded at their estimated fair values. The fair value of the trade name was determined using the relief from royalty method, which is based on the present value of royalty fees derived from projected revenues. The fair value of the customer relationships was determined using the multi-period excess earnings method which is based on the present value of the projected after-tax cash flows.

The amortizable trade name will be amortized over 10 years on a straight-line basis while the customer relationships will be amortized on an accelerated basis over 7 years from January 31, 2019, the date the Cumberland assets were acquired by the Company. The allocation of the identifiable intangibles acquired in the Cumberland Asset Acquisition was as follows:

(in millions)	Fair Value		Remaining Useful Life Ranges
Trade name - amortizable	$	0.8	10 Years
Customer relationships	2.4		7 Years
Total identifiable intangibles acquired	$	3.2

GOBA Acquisition

The valuation of identifiable intangible assets of $10.3 million acquired in the GOBA Acquisition include an amortizable trade name and amortizable customer relationships, which have been recorded at their estimated fair values. The fair value of the trade name was determined using the relief from royalty method, which is based on the present value of royalty fees derived from projected revenues. The fair value of the customer relationships was determined using the multi-period excess earnings method which is based on the present value of the projected after-tax cash flows.

The amortizable trade name will be amortized over 15 years on a straight-line basis, while the customer relationships are being amortized on an accelerated basis over 10 years, from July 2, 2018, the date GOBA was acquired by the Company. The allocations of the identifiable intangibles acquired in the GOBA Acquisition were as follows:

(in millions)	Fair Value		Remaining Useful Life Ranges
Trade name - amortizable	$	3.8	15 years
Customer relationships	6.5		10 years
Total identifiable intangibles acquired	$	10.3

Esselte Acquisition

The identifiable intangible assets of $277.0 million acquired in the Esselte Acquisition include amortizable customer relationships, and indefinite lived and amortizable trade names and patents, which have been recorded at their estimated fair values. The fair value of the trade names and patents was determined using the relief from royalty method, which is based on the present value of royalty fees derived from projected revenues. The fair value of the customer relationships was determined using the multi-period excess earnings method, which is based on the present value of the projected after-tax cash flows.

Amortizable customer relationships, trade names and patents are expected to be amortized over lives ranging from 10 to 30 years from the Esselte Acquisition date of January 31, 2017. The customer relationships are being amortized on an accelerated basis. The allocations of the identifiable intangibles acquired in the Esselte Acquisition were as follows:

(in millions)	Fair Value		Remaining Useful Life Ranges
Trade name - indefinite lived	$	116.8	Indefinite
Trade names - amortizable	53.2		15-30 Years
Customer relationships	102.4		15 Years
Patents	4.6		10 Years
Total identifiable intangibles acquired	$	277.0

The gross carrying value and accumulated amortization by class of identifiable intangible assets as of December 31, 2019 and 2018 were as follows:

	December 31, 2019								December 31, 2018
(in millions)	Gross Carrying Amounts		Accumulated Amortization				Net Book Value		Gross Carrying Amounts		Accumulated Amortization				Net Book Value
Indefinite-lived intangible assets:
Trade names	$	467.3	$	(44.5	)	(1)	$	422.8	$	471.7	$	(44.5	)	(1)	$	427.2
Amortizable intangible assets:
Trade names	316.7		(83.7		)		233.0		306.0		(70.5		)		235.5
Customer and contractual relationships	241.0		(142.3		)		98.7		240.2		(120.5		)		119.7
Patents	5.5		(1.4		)		4.1		5.5		(0.9		)		4.6
Subtotal	563.2		(227.4		)		335.8		551.7		(191.9		)		359.8
Total identifiable intangibles	$	1,030.5	$	(271.9	)		$	758.6	$	1,023.4	$	(236.4	)		$	787.0

(1) Accumulated amortization prior to the adoption of authoritative guidance on goodwill and other intangible assets, at which time further amortization ceased.

The Company’s intangible amortization expense was $35.4 million, $36.7 million and $35.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Estimated amortization expense for amortizable intangible assets for the next five years is as follows:

(in millions)	2020		2021		2022		2023		2024
Estimated amortization expense(2)	$	32.0	$	28.4	$	24.9	$	22.6	$	21.0

(2)

Actual amounts of amortization expense may differ from estimated amounts due to changes in foreign currency exchange rates, additional intangible asset acquisitions, impairment of intangible assets, accelerated amortization of intangible assets and other events.