Intangible Assets

12 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets Disclosure [Text Block]

Intangible Assets

A summary of our amortizable intangible assets is as follows:

		2022						2021						2020
	Average Useful Life (Years)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Acquired franchise rights (a)	56 – 60	$	837	$	(200)	$	637	$	976	$	(187)	$	789
Customer relationships	10 – 24	571		(237)		334		623		(227)		396
Brands	20 – 40	1,097		(973)		124		1,151		(989)		162
Other identifiable intangibles	10 – 24	447		(265)		182		451		(260)		191
Total		$	2,952	$	(1,675)	$	1,277	$	3,201	$	(1,663)	$	1,538
Amortization expense						$	78					$	91	$	90

(a)Decrease is primarily due to the write-off of our distribution rights for Bang energy drinks. See Note 1 for further information.

Amortization is recognized on a straight-line basis over an intangible asset’s estimated useful life. Amortization of intangible assets for each of the next five years, based on existing intangible assets as of December 31, 2022 and using average 2022 foreign exchange rates, is expected to be as follows:

	2023		2024		2025		2026		2027
Five-year projected amortization	$	77	$	76	$	74	$	67	$	64

Depreciable and amortizable assets are evaluated for impairment upon a significant change in the operating or macroeconomic environment. In these circumstances, if an evaluation of the undiscounted cash flows indicates impairment, the asset is written down to its estimated fair value, which is based on discounted future cash flows. Useful lives are periodically evaluated to determine whether events or circumstances have occurred which indicate the need for revision.

Indefinite-Lived Intangible Assets

In the first quarter of 2022, we discontinued or repositioned certain juice and dairy brands in Russia in our Europe division. As a result, we recognized pre-tax impairment charges (included in brand portfolio impairment charges) of $241 million ($193 million after-tax or $0.14 per share) in impairment of intangible assets, primarily related to indefinite-lived intangible assets in the year ended December 31, 2022. See Note 1 for further information.

In the second quarter of 2022, macroeconomic factors, sanctions and other regulations as a result of the Russia-Ukraine conflict indicated a material deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in Russia, primarily assumptions underlying the weighted-average cost of capital. These factors required us to perform a quantitative assessment, despite the absence of a material adverse impact on these assets’ financial performance (e.g., sales, operating profit, cash flows). The fair value of our indefinite-lived intangible assets in Russia was estimated using discounted cash flows under the income approach, which we consider to be a Level 3 measurement. We determined that the carrying value exceeds the fair value, with the decrease in the fair value primarily attributable to a significant increase in the weighted-average cost of capital, which reflects the macroeconomic uncertainty in Russia. As a result of the quantitative assessment, we recorded pre-tax impairment charges of $1.2 billion ($958 million after-tax or $0.69 per share) in impairment of intangible assets, related to our juice and dairy brands in Russia in our Europe division, in the year ended December 31, 2022. See Note 1 for further information.

As discussed in Note 2, we perform our annual impairment assessment on indefinite-lived intangible assets during our third quarter. The annual impairment assessment on indefinite-lived intangible assets performed in the third quarter of 2022, based on best available market information and our internal forecasts and operating plans at the time, resulted in no impairment.

In the fourth quarter of 2022, macroeconomic conditions including a high interest rate and inflationary cost environment, coupled with recent business performance, indicated a deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in various markets, primarily assumptions underlying the weighted-average cost of capital and the impact of economic uncertainty on current and future financial performance, and required us to perform a quantitative assessment on certain assets. The fair value of our indefinite-lived intangible assets was estimated using discounted cash flows under the income approach, which we consider to be a Level 3 measurement. We determined that the carrying value exceeded the fair value, which reflects the increase in the weighted-average cost of capital as well as our most current estimates of future sales and their contributions to operating profit and expected future cash flows (including perpetuity growth assumptions). As a result of the quantitative assessment, we recorded pre-tax impairment charges of $1.6 billion ($1.3 billion after-tax or $0.94 per share) in impairment of intangible assets, primarily related to the SodaStream brand in our Europe division, in the year ended December 31, 2022. See Note 1 for further information.

As of December 31, 2022, the estimated fair values of our indefinite-lived reacquired and acquired franchise rights recorded at PBNA exceeded their carrying values. However, there could be an impairment of the carrying value of PBNA’s reacquired and acquired franchise rights, as well as further impairment to the carrying value of the SodaStream brand and goodwill, if future sales and their contributions to operating profit do not achieve our expected future cash flows (including perpetuity growth assumptions) or if macroeconomic conditions result in a future increase in the weighted-average cost of capital used to estimate fair value.

We did not recognize any impairment charges for goodwill in each of the years ended December 31, 2022, December 25, 2021 and December 26, 2020. We did not recognize any impairment charges for indefinite-lived intangible assets in the year ended December 25, 2021. In 2020, we recognized pre-tax impairment charges of $42 million, primarily related to a coconut water brand in PBNA.

For further information on our policies for indefinite-lived intangible assets, see Note 2.

The change in the book value of indefinite-lived intangible assets is as follows:

	Balance, Beginning 2021		Acquisitions/(Divestitures)		Translation and Other		Balance, End of 2021		Acquisitions/(Divestitures)		Impairment		Translation and Other		Balance, End of 2022
FLNA (a)
Goodwill	$	465	$	(8)	$	1	$	458	$	—	$	—	$	(7)	$	451
Brands	340		—		—		340		—		(88)		(1)		251
Total	805		(8)		1		798		—		(88)		(8)		702
QFNA
Goodwill	189		—		—		189		—		—		—		189
Brands	—		—		—		—		—		—		—		—
Total	189		—		—		189		—		—		—		189
PBNA (b)
Goodwill	12,189		(216)		1		11,974		—		—		(27)		11,947
Reacquired franchise rights	7,107		—		—		7,107		—		—		(46)		7,061
Acquired franchise rights	1,536		1		1		1,538		230		—		(10)		1,758
Brands (c)	3,122		(290)		(324)		2,508		—		—		—		2,508
Total	23,954		(505)		(322)		23,127		230		—		(83)		23,274
LatAm
Goodwill	458		—		(25)		433		—		—		3		436
Brands (d)	108		(1)		(7)		100		—		(29)		4		75
Total	566		(1)		(32)		533		—		(29)		7		511
Europe (e)
Goodwill (f)	3,806		(28)		(78)		3,700		—		—		(54)		3,646
Reacquired franchise rights (f)	496		(23)		(32)		441		—		—		(20)		421
Acquired franchise rights (f)	172		—		(14)		158		—		(1)		(9)		148
Brands (g) (h)	4,072		—		182		4,254		—		(2,684)		94		1,664
Total	8,546		(51)		58		8,553		—		(2,685)		11		5,879
AMESA
Goodwill	1,096		(2)		(31)		1,063		14		—		(62)		1,015
Brands (i)	214		—		(9)		205		—		(36)		(13)		156
Total	1,310		(2)		(40)		1,268		14		(36)		(75)		1,171
APAC
Goodwill	554		3		7		564		—		—		(46)		518
Brands (c) (j)	445		—		31		476		—		(172)		(37)		267
Total	999		3		38		1,040		—		(172)		(83)		785
Total goodwill	18,757		(251)		(125)		18,381		14		—		(193)		18,202
Total reacquired franchise rights	7,603		(23)		(32)		7,548		—		—		(66)		7,482
Total acquired franchise rights	1,708		1		(13)		1,696		230		(1)		(19)		1,906
Total brands	8,301		(291)		(127)		7,883		—		(3,009)		47		4,921
Total	$	36,369	$	(564)	$	(297)	$	35,508	$	244	$	(3,010)	$	(231)	$	32,511

(a)Acquisitions/divestitures in 2021 primarily reflect purchase price allocation adjustments related to our acquisition of BFY Brands, Inc. (BFY Brands). Impairment in 2022 is related to a baked fruit convenient food brand.

(b)Acquisitions/divestitures in 2021 primarily reflect assets reclassified as held for sale in connection with our Juice Transaction. See Note 13 for further information. Acquisitions/divestitures in 2022 primarily reflect our agreement with Celsius to distribute Celsius energy drinks in the United States. See Note 9 for further information.

(c)Translation and other in 2021 primarily reflects the allocation of the Rockstar brand to the respective divisions, which was finalized in 2021 as part of purchase price allocation.

(d)Impairment in 2022 is related to the sale of certain non-strategic brands. See Note 1 for further information.

(e)Acquisitions/divestitures in 2021 primarily reflect assets reclassified as held for sale in connection with our Juice Transaction. See Note 13 for further information.

(f)Translation and other primarily reflects the depreciation of the euro in 2021 and the depreciation of British pound and euro, partially offset by appreciation of the Russian ruble in 2022.

(g)Impairment in 2022 is related to the SodaStream brand, the decrease in fair value as a result of the Russia-Ukraine conflict and the discontinuation or repositioning of certain juice and dairy brands in Russia.

(h)Translation and other in 2021 reflects the allocation of the Rockstar brand from PBNA, which was finalized in 2021 as part of purchase price allocation, partially offset by the depreciation of the euro.