Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Note 5. Goodwill and Intangible Assets

Goodwill by segment was:


	As of June 30, 2022		As of December 31, 2021
	(in millions)
Latin America	$	698	$	674
AMEA	3,213		3,365
Europe	8,060		7,830
North America	10,132		10,109
Goodwill	$	22,103	$	21,978

Intangible assets consisted of the following:


	As of June 30, 2022		As of December 31, 2021
	(in millions)
Indefinite-life intangible assets	$	17,392	$	17,299
Definite-life intangible assets	2,950		2,991
	20,342		20,290
Accumulated amortization	(2,003)		(1,999)
Intangible assets, net	$	18,339	$	18,291

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 $32 million for the three months and $64 million for the six months ended June 30, 2022 and $32 million for the three months and $70 million for the six months ended June 30, 2021. For the next five years, we currently estimate annual amortization expense of approximately $125 million in 2022-2024, approximately $105 million in 2025 and approximately $65 million in 2026 (reflecting June 30, 2022 exchange rates).

Changes in goodwill and intangible assets consisted of:


	Goodwill		Intangible Assets, at cost
	(in millions)
Balance at January 1, 2022	$	21,978	$	20,290
Currency	(666)		(604)

Acquisitions	791		734
Asset impairments	—		(78)
Balance at June 30, 2022	$	22,103	$	20,342

Changes to goodwill and intangibles were:

•Acquisitions - In connection with our acquisition of Chipita, we recorded a preliminary purchase price allocation of $791 million to goodwill and $734 million to intangible assets. See Note 2, Acquisitions and Divestitures, for additional information.

•Asset impairment - As further described below, during the first quarter of 2022, we recorded a $78 million intangible asset impairment in AMEA due to lower than expected growth and profitability of a local biscuit brand sold in select markets in AMEA and Europe.

During the second quarter of 2022, we evaluated our goodwill and intangible asset impairment risk through an assessment of potential triggering events, including qualitative and quantitative of the overall global economic environment and impacts from the war in Ukraine. Based on the results of our assessment, we concluded there were no impairment indicators for goodwill and intangible assets. During the first quarter of 2022, we recorded a $78 million impairment charge within asset impairment and exit costs based on the excess carrying value over the estimated fair value of a biscuit brand. During the second quarter of 2021, we recorded $32 million of intangible asset impairments resulting primarily from lower than expected sales growth for one brand across our North America segment. We use several accepted valuation methods in our indefinite-life impairment testing, including relief of royalty, excess earnings and excess margin, that utilize estimates of future sales, earnings growth rates, royalty rates and discount rates in determining a brand's global fair value.

During our 2021 annual indefinite-life intangible asset testing in the third quarter of 2021, we identified eight brands, including the one brand impaired during the first quarter of 2022, that each had a fair value in excess of book value of 10% or less. The aggregate book value of the eight brands was $987 million as of June 30, 2022. We continue to monitor our brand performance, particularly in light of the significant global economic uncertainties and related impacts to our business. If a brand's earnings expectations, including the timing of the expected recovery from the war and the pandemic, 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.