Goodwill and Other Intangible Assets (Notes)

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. We determine the estimated fair values after review and consideration of relevant information including discounted cash flows, quoted market prices, and estimates made by management. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed, such excess is recorded as goodwill.

We perform our annual goodwill impairment assessment as of October 1. We perform this assessment more frequently if impairment indicators exist. Effective for the quarter ended December 31, 2017, we adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which amends the existing requirements by eliminating Step 2 from the goodwill impairment test. Under the amended guidance, we performed our annual goodwill impairment test by comparing the fair value of each reporting unit with its carrying amount. We determine the estimated fair value of each reporting unit based on a combination of earnings before interest, taxes, depreciation, and amortization (“EBITDA”), valuation multiples, and estimated future cash flows discounted at rates commensurate with the capital structure and cost of capital of comparable market participants, giving appropriate consideration to the prevailing borrowing rates within the casino industry in general. We also evaluate the aggregate fair value of all of our reporting units and other non-operating assets in comparison to our aggregate debt and equity market capitalization at the test date. EBITDA multiples and discounted cash flows are common measures used to value businesses in our industry.

We perform our annual impairment assessment of other non-amortizing intangible assets as of October 1. We perform this assessment more frequently if impairment indicators exist. We determine the estimated fair value of our non-amortizing intangible assets by primarily using the “Relief from Royalty Method” and “Excess Earnings Method” under the income approach.

The evaluation of goodwill and other non-amortizing intangible assets requires the use of estimates about future operating results, valuation multiples, and discount rates to determine their estimated fair value. Changes in these assumptions can materially affect these estimates. Thus, to the extent gaming volumes deteriorate in the near future, discount rates increase significantly, or we do not meet our projected performance, we could have impairments to record in the future and such impairments could be material.

Changes in Carrying Value of Goodwill by Segment

(In millions)	Las Vegas			Other U.S.			All Other		CEC Total
Gross Goodwill
Balance as of January 1, 2016	$	4,410		$	650		$	—	$	5,060
Balance as of December 31, 2016	4,410			650			—		5,060
Accumulated Impairment
Balance as of January 1, 2016	(3,115		)	(337		)	—		(3,452		)
Balance as of December 31, 2016	(3,115		)	(337		)	—		(3,452		)
Net carrying value, as of December 31, 2016	$	1,295		$	313		$	—	$	1,608

Gross Goodwill
Balance as of January 1, 2017	$	4,410		$	650		$	—	$	5,060
OpCo acquisition ⁽¹⁾	1,794			352			61		2,207
Balance as of December 31, 2017	6,204			1,002			61		7,267
Accumulated Impairment
Balance as of January 1, 2017 and December 31, 2017	(3,115		)	(337		)	—		(3,452		)
Net carrying value, as of December 31, 2017 ⁽²⁾	$	3,089		$	665		$	61	$	3,815

____________________


⁽¹⁾	See Note 4 for further details relating to the acquisition of OpCo.


⁽²⁾	$405 million of goodwill is associated with a reporting unit with zero or negative carrying value. As the reporting unit has a positive fair value and as a result of the revised one-step impairment test under ASU 2017-04 described above, there is no impairment associated with this reporting unit.

Changes in Carrying Value of Intangible Assets Other than Goodwill

	Amortizing						Non-Amortizing					Total
(In millions)	2017			2016			2017			2016		2017			2016
Balance as of January 1	$	285		$	350		$	148		$	148	$	433		$	498
Amortization expense	(67		)	(65		)	—			—		(67		)	(65		)
Deconsolidation of Horseshoe Baltimore ⁽¹⁾	—			—			(22		)	—		(22		)	—
OpCo acquisition ⁽²⁾	137			—			1,124			—		1,261			—
Other	—			—			4			—		4			—
Balance as of December 31	$	355		$	285		$	1,254		$	148	$	1,609		$	433

____________________


⁽¹⁾	See Note 2 or further details relating to the deconsolidation of Horseshoe Baltimore.


⁽²⁾	See Note 4 for further details relating to the acquisition of OpCo.

Gross Carrying Value and Accumulated Amortization of Intangible Assets Other than Goodwill

	December 31, 2017								December 31, 2016
(Dollars in millions)	Weighted Average Remaining Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortizing intangible assets
Customer relationships	5.0	$	1,030	$	(693	)	$	337	$	893	$	(630	)	$	263
Contract rights	7.0	3		(2		)	1		3		(1		)	2
Gaming rights and other	6.5	43		(26		)	17		43		(23		)	20
		$	1,076	$	(721	)	355		$	939	$	(654	)	285
Non-amortizing intangible assets
Trademarks							790							126
Gaming rights							211							22
Total Rewards							253							—
							1,254							148
Total intangible assets other than goodwill							$	1,609						$	433

The aggregate amortization expense for intangible assets that continue to be amortized was $67 million, $65 million, and $65 million, respectively, for the years ended December 31, 2017, 2016, and 2015.

Estimated Five-Year Amortization

	Years Ended December 31,
(In millions)	2018		2019		2020		2021		2022
Estimated annual amortization expense	$	64	$	63	$	63	$	57	$	14

- 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.

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