Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Note 5. Goodwill and Intangible Assets

Goodwill by segment was:



	As of March 31, 2020		As of December 31, 2019
	(in millions)
Latin America	$	662	$	818
AMEA	2,981		3,151
Europe	7,272		7,523
North America	9,301		9,356
Goodwill	$	20,216	$	20,848

Intangible assets consisted of the following:



	As of March 31, 2020			As of December 31, 2019
	(in millions)
Non-amortizable intangible assets	$	16,674		$	17,296
Amortizable intangible assets	2,267			2,374
	18,941			19,670
Accumulated amortization	(1,670		)	(1,713		)
Intangible assets, net	$	17,271		$	17,957

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 brands, customer-related intangibles, process technology, licenses and non-compete agreements.

Amortization expense for intangible assets was $43 million for the three months ended March 31, 2020 and $44 million for the three months ended March 31, 2019. For the next five years, we currently estimate annual amortization expense of approximately $170 million in 2020, approximately $90 million in 2021 and approximately $80 million in 2022-2024 (reflecting March 31, 2020 exchange rates).

Changes in goodwill and intangible assets consisted of:



	Goodwill			Intangible Assets, at cost
	(in millions)
Balance at January 1, 2020	$	20,848		$	19,670
Currency	(632		)	(729		)
Balance at March 31, 2020	$	20,216		$	18,941

During our 2019 annual testing of non-amortizable intangible assets, we recorded $57 million of impairment charges in the third quarter of 2019 related to nine brands. We recorded charges related to gum, chocolate, biscuits and candy brands of $39 million in Europe, $15 million in AMEA and $3 million in Latin America. We also identified fourteen brands, including the nine impaired brands, with $616 million of aggregate book value as of March 31, 2020, that each had a fair value in excess of book value of 10% or less. We believe our current plans for each of these brands will allow them to not be impaired, but if the brand earnings 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.

During Q1 2020, we evaluated our goodwill and intangible asset impairment risk using both qualitative and quantitative analysis and in light of the COVID-19 global pandemic. Based on the financial performance of our goodwill reporting units and intangible assets during the first quarter of 2020 and review of other significant fair value assumptions, we concluded that no impairment indicators were present that would require a full impairment assessment. We will continue to monitor the potential for asset impairment risk over coming quarters.