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Goodwill and Intangible Assets
 3 Months Ended
Mar. 31, 2016
Goodwill and Intangible Assets

Note 5.  Goodwill and Intangible Assets

 

Goodwill by reportable segment was:

 

  

  
         As of March 31,          As of December 31,  
     2016      2015  
     (in millions)  

Latin America

    $ 902       $ 858   

Asia Pacific

      2,519         2,520   

EEMEA

      1,316         1,304   

Europe

      7,332         7,117   

North America

      8,908         8,865   
  

 

 

     

 

 

  

Goodwill

    $ 20,977       $ 20,664   
  

 

 

     

 

 

  

 

Intangible assets consisted of the following:

 

  
     As of March 31,      As of December 31,  
     2016      2015  
     (in millions)  

Non-amortizable intangible assets

    $ 17,852       $ 17,527   

Amortizable intangible assets

      2,391         2,320   
  

 

 

     

 

 

  
     20,243         19,847   

Accumulated amortization

      (1,149 )       (1,079 ) 
  

 

 

     

 

 

  

Intangible assets, net

    $ 19,094       $ 18,768   
  

 

 

     

 

 

  

Non-amortizable intangible assets consist principally of brand names purchased through our acquisitions of Nabisco Holdings Corp., the Spanish and Portuguese operations of United Biscuits, the global LU biscuit business of Groupe Danone S.A. and Cadbury Limited. Amortizable intangible assets consist primarily of trademarks, customer-related intangibles, process technology, licenses and non-compete agreements. At March 31, 2016, the weighted-average life of our amortizable intangible assets was 13.6 years.

Amortization expense for intangible assets was $44 million in the three months ended March 31, 2016 and $46 million in the three months ended March 31, 2015. We currently estimate annual amortization expense for each of the next five years to be approximately $185 million, estimated using March 31, 2016 exchange rates.

 

Changes in goodwill and intangible assets consisted of:

 

                                     
            Intangible  
     Goodwill      Assets, at cost  
     (in millions)  

Balance at January 1, 2016

    $ 20,664       $ 19,847   

Changes due to:

      

Currency

      389         323   

Acquisition

      (76 )       87   

Asset impairment

      –         (14 ) 
  

 

 

     

 

 

  

Balance at March 31, 2016

    $ 20,977       $ 20,243   
  

 

 

     

 

 

  

Changes to goodwill and intangibles were:

  •   Asset impairment – On March 31, 2016, we recorded $14 million of impairment charges related to a gum & candy trademark in our Europe segment in connection with a binding offer to sell and license certain local confectionery brands in France. See Note 2, Divestitures and Acquisitions – Other Divestitures and Acquisitions, for additional information.
  •   Acquisition – During the first quarter of 2016, in connection with the July 15, 2015 acquisition of an 80% interest in a biscuit operation in Vietnam, we recorded a preliminary allocation of the consideration paid including $26 million of amortizable intangible assets and $61 million of non-amortizable intangible assets. Intangible assets acquired included trademarks and customer-related intangibles with definite and indefinite lives. A preliminary goodwill balance recorded as of July 15, 2015, was adjusted during the first quarter to reflect intangible asset and other asset fair valuations. See Note 2, Divestitures and Acquisitions – Other Divestitures and Acquisitions, for additional information.

During our 2015 annual testing of non-amortizable intangible assets, we recorded $71 million of impairment charges in the three months ended December 31, 2015 related to four trademarks in Asia Pacific, Europe and Latin America. We also noted seven brands, including the four impaired trademarks, with $598 million of aggregate book value as of December 31, 2015 that each had a fair value in excess of book value of 10% or less. While these intangible assets passed our annual impairment testing and we believe our current plans for each of these brands will allow them to continue to not be impaired, if expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then a brand or brands could become impaired in the future.