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Goodwill and Other Intangibles | 12 Months Ended
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Dec. 31, 2017
Goodwill and Other Intangibles |
Goodwill and Other Intangibles | 3Goodwill and Other Intangibles Goodwill and other indefinitely-lived assets are not amortized, but are subject to annual impairment reviews, or more frequent reviews if events or circumstances indicate an impairment may exist. When evaluating goodwill for potential impairment, the Company compares the fair value of its reporting units to their respective carrying amounts. The Company estimates the fair value of its reporting units using a combination of a discounted cash flow method and a market multiple method. If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is recognized in an amount equal to that excess. During 2017, the Company began pursuing various strategic alternatives for its RxC reporting unit. In connection with this effort, the Company performed an interim goodwill impairment test in the second quarter of 2017. The results of the impairment test determined that the fair value of the RxC reporting unit was lower than the carrying value, resulting in a $135 million goodwill impairment charge within operating expenses during the second quarter of 2017. During the third quarter of 2017, the Company performed its required annual impairment tests of its reporting units and concluded there was no impairment of goodwill. On January 2, 2018, the Company sold RxC to McKesson Corporation for $725 million. The transaction is subject to a working capital adjustment. The TCJA enacted on December 22, 2017 reduces the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018 (see Note 11 “Income Taxes”). As a result, the RxC deferred income tax liabilities were reduced by $47 million and an income tax benefit of $47 million was recorded in the 2017 income statement. The reduction in the deferred income tax liabilities increased the carrying value of the RxC reporting unit by $47 million which triggered an additional goodwill impairment in the RxC reporting unit of $46 million during the fourth quarter of 2017. The Company has cumulative goodwill impairments of $181 million as of December 31, 2017. Below is a summary of the changes in the carrying amount of goodwill by segment for the years ended December 31, 2017 and 2016:
|  | Pharmacy |  |  |  |  |  |
In millions |  | Services |  | Retail/LTC |  | Total
Balance, December 31, 2015 |  | $ | 21,685 |  | $ | 16,421 |  | $ | 38,106
Acquisitions |  |  | — |  |  | 126 |  |  | 126
Foreign currency translation adjustments |  |  | — |  |  | 17 |  |  | 17
Other (1) |  |  | (48) |  |  | 48 |  |  | —
Balance, December 31, 2016 |  |  | 21,637 |  |  | 16,612 |  |  | 38,249
Acquisitions |  |  | 182 |  |  | 203 |  |  | 385
Foreign currency translation adjustments |  |  | — |  |  | (2) |  |  | (2)
Impairments |  |  | — |  |  | (181) |  |  | (181)
Balance, December 31, 2017 |  | $ | 21,819 |  | $ | 16,632 |  | $ | 38,451
| (1) |  | “Other” represents immaterial purchase accounting adjustments for acquisitions.
Indefinitely-lived intangible assets are tested for impairment by comparing the estimated fair value of the asset to its carrying value. The Company estimates the fair value of its indefinitely-lived trademark using the relief from royalty method under the income approach. If the carrying value of the asset exceeds its estimated fair value, an impairment loss is recognized and the asset is written down to its estimated fair value. During the third quarter of 2017, the Company performed its annual impairment test of the indefinitely-lived trademark and concluded there was no impairment as of the testing date. The following table is a summary of the Company’s intangible assets as of December 31:
|  | 2017 |  | 2016
|  | Gross |  |  |  |  | Net |  | Gross |  |  |  |  | Net
|  | Carrying |  | Accumulated |  | Carrying |  | Carrying |  | Accumulated |  | Carrying
In millions |  | Amount |  | Amortization |  | Amount |  | Amount |  | Amortization |  | Amount
Trademark (indefinitely-lived) |  | $ | 6,398 |  | $ | — |  | $ | 6,398 |  | $ | 6,398 |  | $ | — |  | $ | 6,398
Customer contracts and relationships and covenants not to compete |  |  | 12,341 |  |  | (5,536) |  |  | 6,805 |  |  | 11,485 |  |  | (4,802) |  |  | 6,683
Favorable leases and other |  |  | 1,190 |  |  | (763) |  |  | 427 |  |  | 1,123 |  |  | (693) |  |  | 430
|  | $ | 19,929 |  | $ | (6,299) |  | $ | 13,630 |  | $ | 19,006 |  | $ | (5,495) |  | $ | 13,511
The Company amortizes intangible assets with finite lives over the estimated useful lives of the respective assets, which have a weighted average useful life of 15.4 years. The weighted average useful life of the Company’s customer contracts and relationships and covenants not to compete is 15.3 years. The weighted average life of the Company’s favorable leases and other intangible assets is 16.2 years. Amortization expense for intangible assets totaled $817 million, $795 million and $611 million in 2017, 2016 and 2015, respectively. The anticipated annual amortization expense for these intangible assets for the next five years is as follows:
In millions |  |  |
2018 |  | $ | 817
2019 |  |  | 771
2020 |  |  | 600
2021 |  |  | 539
2022 |  |  | 494

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16373-109275 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16265-109275 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16323-109275 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13816-109267 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13854-109267 + Details
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