Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]


NOTE 6—GOODWILL AND INTANGIBLE ASSETS

The table below presents our goodwill, intangible assets and MSRs as of December 31, 2020 and 2019. 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, 2020
(Dollars in millions)	Carrying Amount of Assets		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Amortization Period
Goodwill	$	14,653	N/A		$	14,653	N/A
Intangible assets:
Purchased credit card relationship (“PCCR”) intangibles	148		$	(138)	10		6.2 years

Other(1)	248		(168)		80		7.3 years
Total intangible assets	396		(306)		90		7.1 years
Total goodwill and intangible assets	$	15,049	$	(306)	$	14,743
Commercial MSRs(2)	$	542	$	(175)	$	367

	December 31, 2019
(Dollars in millions)	Carrying Amount of Assets		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Amortization Period
Goodwill	$	14,653	N/A		$	14,653	N/A
Intangible assets:
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

__________

(1)Primarily consists of intangibles for sponsorship, customer and merchant relationships, partnership, trade name and other contract intangibles.

(2)Commercial MSRs are accounted for under the amortization method on our consolidated balance sheets. We recorded $69 million and $70 million of amortization expense for the years ended December 31, 2020 and 2019, respectively.

Goodwill

There were no changes in the carrying amount of goodwill by each of our business segments for the year ended December 31, 2020, and the following table presents such changes for the years ended December 31, 2019 and 2018.We did not recognize any goodwill impairment during 2020, 2019 or 2018.

Table 6.2: Goodwill by Business Segments


(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking		Total
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



Balance as of December 31, 2020	$	5,088	$	4,645	$	4,920	$	14,653

__________

(1)Represents foreign currency translation adjustments and measurement period adjustments on prior period acquisitions.

The goodwill impairment test is performed as of October 1 of each year. An impairment of a reporting unit’s goodwill is determined based on the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the amount of goodwill allocated to the reporting unit.

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. Capital is allocated based on each reporting unit’s specific regulatory capital requirements, economic capital requirements, and underlying risks. Consolidated stockholder’s equity in excess of the sum of all reporting unit’s capital requirements that is not identified for future capital needs, such as dividends, share buybacks, or other strategic initiatives, is allocated to the reporting units and Other category and assumed distributed to equity holders in future periods. Our discounted cash flow analysis requires management to make judgments about future loan and deposit growth, revenue growth, credit losses, and capital rates. The reasonableness of our fair value calculation is assessed by reference to a market-based approach using comparable market multiples and recent market transactions where available.

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, 2020, 2019 and 2018 and the estimated future amortization expense for intangible assets as of December 31, 2020:

Table 6.3: Amortization Expense


(Dollars in millions)	Amortization Expense
Actual for the year ended December 31,
2018	$	174
2019	112
2020	60
Estimated future amounts for the year ending December 31,
2021	20
2022	16
2023	13
2024	10
2025	9
Thereafter	14
Total estimated future amounts	$	82