3) GOODWILL AND OTHER INTANGIBLE ASSETS

The Company performs an annual fair value-based impairment test of goodwill and intangible assets with indefinite lives, comprised of FCC licenses, during the fourth quarter and also between annual tests if an event occurs or if circumstances change that would more likely than not reduce the fair value of a reporting unit or an indefinite-lived intangible asset below its carrying value. Goodwill is tested for impairment at the reporting unit level, which is one level below or the same as an operating segment. FCC licenses are tested for impairment at the geographic market level. The Company considers each geographic market, which is comprised of all of the Company’s radio or television stations within that geographic market, to be a single unit of accounting because the FCC licenses at this level represent their highest and best use.

For 2014, the Company performed qualitative assessments for five reporting units, five radio markets, and ten television markets which management estimates each have fair values that exceed their respective carrying values by 20% or more. For each reporting unit, the Company weighed the relative impact of factors that are specific to the reporting unit as well as industry and macroeconomic factors. For each radio and television market, the Company weighed the relative impact of market-specific and macroeconomic factors. Based on the qualitative assessments, considering the aggregation of the relevant factors, the Company concluded that it is not more likely than not that the fair values of these reporting units and the fair value of FCC licenses within each market are less than their respective carrying amounts. Therefore, performing the quantitative impairment test was unnecessary.

For 2014, the Company performed the two-step quantitative goodwill impairment test for the remaining two reporting units, CBS Interactive and CBS Radio. The first step of the goodwill impairment test examines whether the carrying value of a reporting unit exceeds its fair value. If the carrying value exceeds the fair value, the second step of the test compares the implied fair value of a reporting unit’s goodwill with the carrying value of its goodwill to determine the amount of impairment charge, if any. The estimated fair value of each reporting unit for which step one of the impairment test is performed is computed based upon the present value of future cash flows (“Discounted Cash Flow Method”) and both the traded and transaction values of comparable businesses (“Market Comparable Method”). The Discounted Cash Flow Method and Market Comparable Method resulted in substantially equal fair values. The Discounted Cash Flow Method includes the Company’s assumptions for growth rates, operating margins and capital expenditures for the projection period plus the residual value of the business at the end of the projection period. The estimated growth rates, operating margins and capital expenditures for the projection period are based on the Company’s internal forecasts of future performance as well as historical trends. The residual value is estimated based on a perpetual nominal growth rate, which is based on projected long-range inflation and long-term industry projections, and for 2014 was 3.0% for CBS Interactive and 1.5% for CBS Radio. The discount rates, which for 2014 were 9.5% for CBS Interactive and 8.0% for CBS Radio, are determined based on the average of the weighted average cost of capital of comparable entities.

Based on the 2014 annual impairment test, for each of the two reporting units for which the Company performed the first step of the impairment test, the estimated fair values exceeded the respective carrying values and therefore the second step of the impairment test was unnecessary.

For each of the remaining 21 radio and four television markets, the Company performed the quantitative impairment test that compares the estimated fair value of the FCC licenses by geographic market with their respective carrying values. The estimated fair value of each FCC license is computed using the Greenfield Discounted Cash Flow Method (‘‘Greenfield Method’’), which attempts to isolate the income that is attributable to the license alone. The Greenfield Method is based upon modeling a hypothetical start-up station and building it up to a normalized operation that, by design, lacks inherent goodwill and whose other assets have essentially been added as part of the build-up process. The Greenfield Method adds the present value of the estimated annual cash flows of the start-up station over a projection period to the residual value at the end of the projection period. The annual cash flows over the projection period include assumptions for overall advertising revenues in the relevant geographic market, the start-up station’s operating costs and capital expenditures, and a three-year build-up period for the start-up station to reach a normalized state of operations, which reflects the point at which it achieves an average market share. In order to estimate the revenues of a start-up station, the total market advertising revenue in the subject market is estimated based on recent industry projections. Operating costs and capital expenditures are estimated based on both industry and internal data. The residual value is calculated using a perpetual nominal growth rate, which is based on projected long-range inflation in the U.S. and long-term industry projections. The discount rate is determined based on the average of the weighted average cost of capital of comparable entities in the broadcast industry. For each television station and radio station, the discount rate used for 2014 was 8.0% and the perpetual nominal growth rates used were 2.5% and 1.5%, respectively.

For its 2014 annual impairment test the Company concluded that the estimated fair values of the indefinite-lived intangible assets for which it performed a quantitative assessment exceeded the respective carrying values and therefore no impairment charge was required.

In December 2014, in connection with its strategy to grow its major market presence, the Company completed a radio station swap with Beasley Broadcast Group, Inc. through which the Company exchanged 13 of its radio stations in Tampa and Charlotte as well as one radio station in Philadelphia, for two radio stations in Philadelphia and three radio stations in Miami. In connection with the radio station swap, the Company recorded a pretax noncash impairment charge of $52 million to reduce the carrying value of the allocated goodwill. The assets associated with the disposed radio stations, which primarily consist of goodwill and FCC licenses, have been presented as held for sale on the Company’s Consolidated Balance Sheets for all periods prior to the closing of the transaction.

During 2012, in connection with the sale of its five owned radio stations in West Palm Beach, the Company recorded a pretax noncash impairment charge of $11 million to reduce the carrying value of the allocated goodwill.

For the years ended December 31, 2014 and 2013, the changes in the book value of goodwill by segment were as follows:



	Balance at							Balance at
	December 31, 2013				Acquisitions			December 31, 2014
Entertainment:
Goodwill		$	9,467		$	—			$	9,467
Accumulated impairment losses		(6,294		)	—				(6,294		)
Goodwill, net of impairment		3,173			—				3,173
Cable Networks:
Goodwill		480			—				480
Accumulated impairment losses		—			—				—
Goodwill, net of impairment		480			—				480
Publishing:
Goodwill		406			—				406
Accumulated impairment losses		—			—				—
Goodwill, net of impairment		406			—				406
Local Broadcasting:
Goodwill		22,244			110		^(a)		22,354
Accumulated impairment losses		(19,715		)	—				(19,715		)
Goodwill, net of impairment		2,529			110				2,639
Total:
Goodwill		32,597			110				32,707
Accumulated impairment losses		(26,009		)	—				(26,009		)
Goodwill, net of impairment		$	6,588		$	110			$	6,698

(a) Amount primarily reflects goodwill acquired in the radio station swap with Beasley Broadcast Group, Inc. At December 31, 2013, the allocated goodwill, net of accumulated impairment relating to the stations disposed of in the swap was included in “Assets held for sale” on the Consolidated Balance Sheet and as a result is not included in the changes in book value above.



	Balance at									Balance at
	December 31, 2012				Acquisitions		Other			December 31, 2013
Entertainment:
Goodwill		$	9,460		$	7	$	—			$	9,467
Accumulated impairment losses		(6,294		)	—		—				(6,294		)
Goodwill, net of impairment		3,166			7		—				3,173
Cable Networks:
Goodwill		480			—		—				480
Accumulated impairment losses		—			—		—				—
Goodwill, net of impairment		480			—		—				480
Publishing:
Goodwill		407			—		(1		)		406
Accumulated impairment losses		—			—		—				—
Goodwill, net of impairment		407			—		(1		)		406
Local Broadcasting:
Goodwill		22,244			—		—				22,244
Accumulated impairment losses		(19,715		)	—		—				(19,715		)
Goodwill, net of impairment		2,529			—		—				2,529
Total:
Goodwill		32,591			7		(1		)		32,597
Accumulated impairment losses		(26,009		)	—		—				(26,009		)
Goodwill, net of impairment		$	6,582		$	7	$	(1	)		$	6,588

The Company’s intangible assets were as follows:



			Accumulated
At December 31, 2014	Gross		Amortization			Net
Intangible assets subject to amortization:
Trade names	$	220	$	(54	)	$	166
Other intangible assets	167		(129		)	38
Total intangible assets subject to amortization	387		(183		)	204
FCC licenses ^(a)	5,804		—			5,804
Total intangible assets	$	6,191	$	(183	)	$	6,008



			Accumulated
At December 31, 2013	Gross		Amortization			Net
Intangible assets subject to amortization:
Trade names	$	222	$	(42	)	$	180
Other intangible assets	211		(159		)	52
Total intangible assets subject to amortization	433		(201		)	232
FCC licenses ^(a)	5,638		—			5,638
Total intangible assets	$	6,071	$	(201	)	$	5,870

(a) The increase in FCC licenses from December 31, 2013 to December 31, 2014 relates to the radio stations acquired in the radio station swap with Beasley Broadcast Group, Inc. At December 31, 2013, the FCC licenses relating to the radio stations disposed of in the swap were included in “Assets held for sale” on the Consolidated Balance Sheet.

Amortization expense was $32 million in 2014, $39 million in 2013 and $45 million in 2012. The Company expects its aggregate annual amortization expense for existing intangible assets subject to amortization for each of the years, 2015 through 2019, to be as follows:



	2015		2016		2017		2018		2019
Amortization expense	$	24	$	19	$	15	$	13	$	13