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Goodwill and Intangible Assets | 12 Months Ended
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Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets |
NOTE 6—GOODWILL AND INTANGIBLE ASSETS
The table below presents our goodwill, intangible assets and MSRs as of December 31, 2019 and 2018. Goodwill is presented separately, while intangible assets and MSRs are included in other assets on our consolidated balance sheets. Table 6.1: Components of Goodwill, Intangible Assets and MSRs
|  | December 31, 2019
(Dollars in millions) |  | Carrying Amount of Assets |  | Accumulated Amortization |  | Net Carrying Amount |  | Remaining Amortization Period
Goodwill |  | $ | 14,653 |  |  | N/A |  |  | $ | 14,653 |  |  | N/A
Intangible assets: |  |  |  |  |  |  |  |
Purchased credit card relationship (“PCCR”) intangibles |  | 1,932 |  |  | $ | (1,864 | ) |  | 68 |  |  | 3.9 years
Other(1) |  | 246 |  |  | (140 | ) |  | 106 |  |  | 6.7 years
Total intangible assets |  | 2,178 |  |  | (2,004 | ) |  | 174 |  |  | 5.6 years
Total goodwill and intangible assets |  | $ | 16,831 |  |  | $ | (2,004 | ) |  | $ | 14,827 |  |  |
Commercial MSRs(2) |  | $ | 555 |  |  | $ | (255 | ) |  | $ | 300 |  |  |
|  | December 31, 2018
(Dollars in millions) |  | Carrying Amount of Assets |  | Accumulated Amortization |  | Net Carrying Amount |  | Remaining Amortization Period
Goodwill |  | $ | 14,544 |  |  | N/A |  |  | $ | 14,544 |  |  | N/A
Intangible assets: |  |  |  |  |  |  |  |
PCCR intangibles |  | 2,102 |  |  | $ | (1,952 | ) |  | 150 |  |  | 3.7 years
Core deposit intangibles |  | 1,149 |  |  | (1,148 | ) |  | 1 |  |  | 0.2 years
Other(1) |  | 271 |  |  | (168 | ) |  | 103 |  |  | 7.1 years
Total intangible assets |  | 3,522 |  |  | (3,268 | ) |  | 254 |  |  | 5.0 years
Total goodwill and intangible assets |  | $ | 18,066 |  |  | $ | (3,268 | ) |  | $ | 14,798 |  |  |
Commercial MSRs(2) |  | $ | 459 |  |  | $ | (185 | ) |  | $ | 274 |  |  |
__________
(1) | Primarily consists of intangibles for sponsorship, customer and merchant relationships, partnership and other contract intangibles and trade name intangibles.
(2) | Commercial MSRs are accounted for under the amortization method on our consolidated balance sheets. We recorded $70 million and $59 million of amortization expense for the years ended December 31, 2019 and 2018, respectively.
Goodwill The following table presents changes in the carrying amount of goodwill by each of our business segments for the years ended December 31, 2019, 2018 and 2017. We did not recognize any goodwill impairment during 2019, 2018 or 2017. Table 6.2: Goodwill by Business Segments
(Dollars in millions) |  | Credit Card |  | Consumer Banking |  | Commercial Banking |  | Total
Balance as of December 31, 2016 |  | $ | 5,018 |  |  | $ | 4,600 |  |  | $ | 4,901 |  |  | $ | 14,519 |
Acquisitions |  | 6 |  |  | 0 |  |  | 0 |  |  | 6 |
Other adjustments(1) |  | 8 |  |  | 0 |  |  | 0 |  |  | 8 |
Balance as of December 31, 2017 |  | 5,032 |  |  | 4,600 |  |  | 4,901 |  |  | 14,533 |
Acquisitions |  | 33 |  |  | 0 |  |  | 0 |  |  | 33 |
Reductions in goodwill related to divestitures |  | 0 |  |  | 0 |  |  | (17 | ) |  | (17 | )
Other adjustments(1) |  | (5 | ) |  | 0 |  |  | 0 |  |  | (5 | )
Balance as of December 31, 2018 |  | 5,060 |  |  | 4,600 |  |  | 4,884 |  |  | 14,544 |
Acquisitions |  | 25 |  |  | 46 |  |  | 36 |  |  | 107 |
Reductions in goodwill related to divestitures |  | 0 |  |  | (1 | ) |  | 0 |  |  | (1 | )
Other adjustments(1) |  | 3 |  |  | 0 |  |  | 0 |  |  | 3 |
Balance as of December 31, 2019 |  | $ | 5,088 |  |  | $ | 4,645 |  |  | $ | 4,920 |  |  | $ | 14,653 |
__________
(1) | Represents foreign currency translation adjustments.
The goodwill impairment test, performed as of October 1 of each year, is a two-step test. The first step identifies whether there is potential impairment by comparing the fair value of a reporting unit to its carrying amount, including goodwill. If the fair value of a reporting unit is less than its carrying amount, the second step of the impairment test is required to measure the amount of any potential impairment loss. The fair value of reporting units is calculated using a discounted cash flow methodology, a form of the income approach. The calculation uses projected cash flows based on each reporting unit’s internal forecast and uses the perpetuity growth method to calculate terminal values. These cash flows and terminal values are then discounted using appropriate discount rates, which are largely based on our external cost of equity with adjustments for risk inherent in each reporting unit. Cash flows are adjusted, as necessary, in order to maintain each reporting unit’s equity capital requirements. Our discounted cash flow analysis requires management to make judgments about future loan and deposit growth, revenue growth, credit losses, and capital rates. The key inputs into the discounted cash flow analysis were consistent with market data, where available, indicating that assumptions used were within a reasonable range of observable market data. Intangible Assets In connection with our acquisitions, we recorded intangible assets including PCCRs, sponsorships, customer and merchant relationships, partnerships, trade names and other contract intangibles. At acquisition, the PCCRs reflect the estimated value of existing credit card holder relationships. Intangible assets are typically amortized over their respective estimated useful lives on either an accelerated or straight-line basis. The following table summarizes the actual amortization expense recorded for the years ended December 31, 2019, 2018 and 2017 and the estimated future amortization expense for intangible assets as of December 31, 2019: Table 6.3: Amortization Expense
(Dollars in millions) |  | Amortization Expense
Actual for the year ended December 31, |  |
2017 |  | $ | 245 |
2018 |  | 174 |
2019 |  | 112 |
Estimated future amounts for the year ending December 31, |  |
2020 |  | 64 |
2021 |  | 32 |
2022 |  | 24 |
2023 |  | 17 |
2024 |  | 11 |
Thereafter |  | 18 |
Total estimated future amounts |  | $ | 166 |

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