Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Note 5. Goodwill and Intangible Assets

Goodwill by segment was:


	As of March 31, 2021		As of December 31, 2020
	(in millions)
Latin America	$	673	$	706
AMEA	3,229		3,250
Europe	7,929		8,038
North America	10,114		9,901
Goodwill	$	21,945	$	21,895

Intangible assets consisted of the following:


	As of March 31, 2021		As of December 31, 2020
	(in millions)
Indefinite-life intangible assets	$	17,505	$	17,492
Definite-life intangible assets	2,956		2,907
	20,461		20,399
Accumulated amortization	(1,934)		(1,917)
Intangible assets, net	$	18,527	$	18,482

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

Amortization expense for intangible assets was $38 million for the three months ended March 31, 2021 and $43 million for the three months ended March 31, 2020. For the next five years, we currently estimate annual amortization expense of approximately $130 million in 2021, approximately $120 million in 2022-2024 and approximately $105 million in 2025 (reflecting March 31, 2021 exchange rates).

Changes in goodwill and intangible assets consisted of:


	Goodwill		Intangible Assets, at cost
	(in millions)
Balance at January 1, 2021	$	21,895	$	20,399
Currency	(332)		(217)

Acquisitions	382		279

Balance at March 31, 2021	$	21,945	$	20,461

In connection with our acquisitions of Grenade and the remaining interest in Hu Master Holdings during the first quarter of 2021, we recorded a preliminary purchase price allocation of $382 million to goodwill and $279 million to intangible assets. See Note 2, Acquisitions and Divestitures, for additional information.

During the first quarters of 2021 and 2020, we evaluated our goodwill and intangible asset impairment risk through an assessment of potential triggering events. In light of the ongoing COVID-19 global pandemic, we considered qualitative and quantitative information in our assessment over indefinite-life intangible assets. Based on the financial performance of our goodwill reporting units and intangible assets 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.

In 2020, we recorded $144 million of intangible asset impairment charges related to eight brands. The ongoing impact of the COVID-19 pandemic resulted in greater declines in the sales and earnings for certain brands, particularly our gum brands. During our annual impairment testing as of July 1, 2020, we identified nine brands, including the eight impaired brands, that each had a fair value in excess of book value of 10% or less. The aggregate book value of the nine brands was $738 million as of March 31, 2021. 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.