Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Note 6. Goodwill and Intangible Assets

Goodwill by operating segment was:


	As of December 31,
	2020		2019
	(in millions)
Latin America	$	706	$	818
AMEA	3,250		3,151
Europe	8,038		7,523
North America	9,901		9,356
Goodwill	$	21,895	$	20,848

Intangible assets consisted of the following:


	As of December 31,
	2020		2019
	(in millions)
Indefinite-life intangible assets	$	17,492	$	17,296
Definite-life intangible assets	2,907		2,374
	20,399		19,670
Accumulated amortization	(1,917)		(1,713)
Intangible assets, net	$	18,482	$	17,957

Indefinite-life 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. Definite-life intangible assets consist primarily of trademarks, customer-related intangibles, process technology, licenses and non-compete agreements.

Amortization expense for intangible assets was $194 million in 2020, $174 million in 2019 and $176 million in 2018. For the next five years, we estimate annual amortization expense of approximately $125 million next year, approximately $115 million in years two to four and approximately $100 million in year five, reflecting December 31, 2020 exchange rates.

Changes in goodwill and intangible assets consisted of:


	2020				2019
	Goodwill		Intangible Assets, at cost		Goodwill		Intangible Assets, at cost
	(in millions)
Balance at January 1	$	20,848	$	19,670	$	20,725	$	19,529
Changes due to:
Currency	516		320		17		60
Divestitures	—		—		(43)		—
Acquisitions	531		553		149		138
Asset impairments	—		(144)		—		(57)

Balance at December 31	$	21,895	$	20,399	$	20,848	$	19,670

Changes to goodwill and intangibles were:

•Divestitures – During the second quarter of 2019, we divested the net assets of most of our cheese business in the Middle East and Africa to Arla Foods of Denmark resulting in a goodwill decrease of $43 million. See Note 2, Acquisitions and Divestitures, for additional information.

•Acquisitions – In connection with our acquisition of a majority interest in Give & Go during the second quarter of 2020, we recorded a preliminary purchase price allocation of $531 million to goodwill and $553 million to intangible assets. In connection with the acquisition of Perfect Snacks during the third quarter of 2019, we recorded a purchase price allocation of $150 million to goodwill and $138 million to intangible assets. During 2019, we also finalized the purchase price allocation for the 2018 acquisition of Tate’s Bake Shop, resulting in a $1 million adjustment to goodwill. See Note 2, Acquisitions and Divestitures, for additional information.

•Asset impairments – As further discussed below, we recorded $144 million of intangible asset impairments in 2020 and $57 million in 2019.

In 2020, 2019 and 2018, there were no goodwill impairments and each of our reporting units had sufficient fair value in excess of its carrying value. While all reporting units passed our annual impairment testing, if planned business performance expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then the estimated fair values of a reporting unit or reporting units might decline and lead to a goodwill impairment in the future.

In 2020, we recorded $144 million of intangible asset impairment charges related to eight brands. We recorded charges related to gum, chocolate, biscuits and candy brands of $83 million in North America, $53 million in Europe, $5 million in AMEA and $3 million in Latin America. We also identified nine brands, including the eight impaired trademarks, with $753 million of aggregate book value as of December 31, 2020 that each had a fair value in excess of book value of 10% or less. We continue to monitor our brand performance, particularly in light of the significant uncertainty due to the COVID-19 pandemic and related impacts to our business. If the brand earnings expectations, including the timing of the expected recovery from the COVID-19 pandemic impacts, 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. In 2019, we recorded $57 million of impairment charges for gum, chocolate, biscuits and candy brands of $39 million in Europe, $15 million in AMEA and $3 million in Latin America. In 2018, we recorded $68 million of impairment charges for gum, chocolate, biscuits and candy brands of $45 million in Europe, $14 million in North America and $9 million in AMEA.