GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Oct. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

11.

GOODWILL AND OTHER INTANGIBLE ASSETS

The goodwill balances as of October 31, 2020, 2019 and 2018 and the movements in 2020 and 2019 for each of our reportable segments were as follows:



	Communications Solutions Group			Electronic Industrial Solutions Group		Total
	(in millions)
Goodwill at October 31, 2018	$	904		$	267	$	1,171
Foreign currency translation impact	8			—		8
Goodwill arising from acquisitions	30			—		30
Goodwill at October 31, 2019	942			267		1,209
Foreign currency translation impact	8			6		14
Goodwill arising from acquisitions	34			280		314
Goodwill at October 31, 2020	$	984		$	553	$	1,537

Components of goodwill:
Goodwill	$	1,613		$	267	$	1,880
Accumulated impairment losses	(709		)	—		(709		)
Goodwill at October 31, 2018	$	904		$	267	$	1,171
Goodwill	$	1,651		$	267	$	1,918
Accumulated impairment losses	(709		)	—		(709		)
Goodwill at October 31, 2019	$	942		$	267	$	1,209
Goodwill	$	1,693		$	553	$	2,246
Accumulated impairment losses	(709		)	—		(709		)
Goodwill at October 31, 2020	$	984		$	553	$	1,537

Other intangible assets as of October 31, 2020 and 2019 consisted of the following:



	Other Intangible Assets as of October 31, 2020						Other Intangible Assets as of October 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in millions)
Developed technology	$	915	$	749	$	166	$	876	$	578	$	298
Backlog	17		14		3		13		13		—
Trademark/Tradename	35		25		10		34		21		13
Customer relationships	363		183		180		316		139		177
Non-compete agreements	1		1		—		1		1		—
Total amortizable intangible assets	1,331		972		359		1,240		752		488
In-Process R&D	2		—		2		2		—		2
Total	$	1,333	$	972	$	361	$	1,242	$	752	$	490

In 2020, we recorded additions to goodwill and other intangible assets of $314 million and $88 million, respectively, due to the acquisition of Eggplant and two other acquisitions. In 2019, we recorded additions to goodwill and other intangible assets of $30 million and $56 million, respectively, due to the acquisition of Prisma. For additional information on the acquisitions, see Note 3, "Acquisitions."

There was $2 million and $1 million foreign exchange translation impact to other intangible assets in 2020 and 2019 respectively.

Amortization of other intangible assets was $220 million in 2020, $210 million in 2019 and $204 million in 2018. Estimated intangible assets amortization expense for each of the five succeeding fiscal years is as follows:



	Amortization expense
	(in millions)
2021	$	166
2022	88
2023	65
2024	26
2025	9
Thereafter	5

Goodwill is assessed for impairment on a reporting unit basis at least annually in the fourth quarter, as of September 30, after the annual update to our long-term financial forecasts during our strategic planning cycle, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. The impairment test compares the fair value of a reporting unit with its carrying amount, with an impairment charge recorded for the amount by which the carrying amount exceeds the reporting unit’s fair value up to a maximum amount of the goodwill balance for the reporting unit. As defined in the authoritative guidance, a reporting unit is an operating segment or one level below an operating segment.

We determine fair values for each of the reporting units using the market approach, when available and appropriate, or the income approach, or a combination of both. If multiple valuation methodologies are used, the results are weighted appropriately. Valuations using the market approach are derived from metrics of publicly traded comparable companies. The selections of comparable businesses are based on the markets in which our reporting units operate, giving consideration to risk profiles, size, geography, and diversity of products and services. Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business.

During the fourth quarter of 2020, we performed our annual impairment test of goodwill for all our reporting units using a qualitative approach. Based on the results of our qualitative testing, we believe that it is more-likely-than-not that the fair value of each reporting unit is greater than its respective carrying value. Additionally, we assessed goodwill for impairment upon completion of the organizational change in the first quarter of fiscal 2020 and determined that it was more-likely-than-not that the fair value of the reporting unit was greater than its carrying value. During interim periods of fiscal 2020, we had evaluated the impact of deterioration in overall global economic conditions as a result of the COVID-19 pandemic, including the change in our market capitalization and changes in forecasts for each reporting unit, and we determined that no triggering events had occurred during the year.

As of October 31, 2020, we determined that no goodwill impairment exists and that the remaining goodwill is recoverable for all of our reporting units; however, there can be no assurance that additional goodwill will not be impaired in future periods. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. It is possible that the judgments and estimates described above could change in future periods.

In 2019 we performed our annual impairment test of goodwill for all our reporting units using a qualitative approach, except for our previous ISG reporting unit, which was the only reporting unit in our previous ISG reportable segment, for which the test was performed using a quantitative approach. The income and market approaches were used to determine the fair value of the ISG reporting unit. With respect to the income approach, the discounted cash flow method was used, which included an eight-year future cash flow projection and an estimated terminal value. The market approach used revenue and EBITDA multiples to develop an estimate of fair value. A weighting of 60 percent and 40 percent was applied to the income and market approaches, respectively, to determine the fair value of the ISG reporting unit. The income approach was given a larger weighting based on the underlying detailed financial projections prepared during the strategic planning cycle that reflect the financial and operational facts and circumstances specific to ISG as of the valuation date. Based on the results of our annual impairment tests, the fair value of each of our reporting units exceeded the carrying value.

In 2018 we performed our annual impairment test of goodwill for all our reporting units using a qualitative approach, except for our previous ISG reporting unit, which was the only reporting unit in our previous ISG reportable segment, for which the test was performed using a quantitative approach since their revenue and earnings had not been consistent with originally projected results, thus requiring a reduction of our long-term financial forecasts included in our revised strategic plan. The income and market approaches were used to determine the fair value of the ISG reporting unit. With respect to the income approach, the discounted cash flow method was used, which included an eight-year future cash flow projection and an estimated terminal value. The market approach used revenue and EBITDA multiples to develop an estimate of fair value. A weighting of 60 percent and 40 percent was applied to the income and market approaches, respectively, to determine the fair value of the ISG reporting unit. The income approach was given a larger weighting based on the underlying detailed financial projections prepared during the strategic planning cycle that reflect the financial and operational facts and circumstances specific to ISG as of the valuation date. Based on the results of our testing, the fair value of our previous ISG reporting unit did not exceed the carrying value. The primary factors contributing to a reduction in fair value of ISG were weaker-than-expected market growth rates since acquisition and significant integration efforts in 2018 resulting in lower revenue and profitability trends included in our long-term financial forecasts. As a result, we recorded an impairment loss of $709 million for ISG in 2018.