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Goodwill and Intangible Assets | 9 Months Ended
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Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets | Note 5. Goodwill and Intangible Assets Goodwill Changes in goodwill consisted of (in millions):
| Latin America |  | AMEA |  | Europe |  | North America |  | Total
January 1, 2022 | $ | 674 |  |  | $ | 3,365 |  |  | $ | 7,830 |  |  | $ | 10,109 |  |  | $ | 21,978 |
Currency | 41 |  |  | (233) |  |  | (550) |  |  | (15) |  |  | (757) |
Acquisitions (1) | 714 |  |  | — |  |  | 795 |  |  | 1,020 |  |  | 2,529 |
Held for Sale (1) | — |  |  | — |  |  | (66) |  |  | (226) |  |  | (292) |
Divestitures | (8) |  |  | — |  |  | — |  |  | — |  |  | (8) |
Balance at December 31, 2022 | $ | 1,421 |  |  | $ | 3,132 |  |  | $ | 8,009 |  |  | $ | 10,888 |  |  | $ | 23,450 |
Currency | 136 |  |  | (134) |  |  | (117) |  |  | 2 |  |  | (113) |
Acquisitions (1) (2) | 3 |  |  | — |  |  | — |  |  | (33) |  |  | (30) |
Balance at September 30, 2023 | $ | 1,560 |  |  | $ | 2,998 |  |  | $ | 7,892 |  |  | $ | 10,857 |  |  | $ | 23,307 |
(1)Refer to Note 2, Acquisitions and Divestitures for more information. (2)Relates to purchase price allocation adjustments for Ricolino and Clif Bar during 2023. Intangible Assets Intangible assets consisted of the following (in millions):
| As of September 30, 2023 |  | As of December 31, 2022
| Gross carrying amount |  | Accumulated amortization |  | Net carrying amount |  | Gross carrying amount |  | Accumulated amortization |  | Net carrying amount
Definite-life intangible assets | $ | 3,259 |  |  | $ | (2,071) |  |  | $ | 1,188 |  |  | $ | 3,354 |  |  | $ | (2,057) |  |  | $ | 1,297 |
Indefinite-life intangible assets (1) (2) | 18,287 |  |  | — |  |  | 18,287 |  |  | 18,413 |  |  | — |  |  | 18,413 |
Total | $ | 21,546 |  |  | $ | (2,071) |  |  | $ | 19,475 |  |  | $ | 21,767 |  |  | $ | (2,057) |  |  | $ | 19,710 |
(1)In 2022, we recorded $101 million of intangible asset impairment charges related to two biscuit brands in the AMEA segment, of which $78 million was recorded in the first quarter and $23 million was recorded in the third quarter. (2)In 2023, we recorded $26 million of intangible asset impairment charges related to a chocolate brand in the North America segment for $20 million and a biscuit brand in the Europe segment for $6 million in the third quarter. Indefinite-life intangible assets consist principally of brand names purchased through our acquisitions of Nabisco Holdings Corp., the global LU biscuit business of Groupe Danone S.A., Cadbury Limited and Clif Bar. Definite-life intangible assets consist primarily of trademarks, customer-related intangibles, process technology, licenses and non-compete agreements. Amortization expense for intangible assets was $38 million for the three months and $114 million for the nine months ended September 30, 2023 and $32 million for the three months and $96 million for the nine months ended September 30, 2022. For the next five years, we currently estimate annual amortization expense of approximately $145 million in 2023-2025, approximately $95 million in 2026 and approximately $90 million in 2027 (reflecting September 30, 2023 exchange rates). During the third quarter of 2023, we performed our annual impairment assessment test for goodwill and indefinite-life intangible assets as of July 1, 2023. Our 2023 annual testing of goodwill resulted in no impairments as each reporting unit had fair value in excess of carrying value. As part of our goodwill quantitative assessment, we compare a reporting unit's estimated fair value to its carrying value. If the carrying value of the reporting unit exceeds the fair value, we would record an impairment for the difference. We estimate a reporting unit's fair value using a discounted cash flow method that incorporates discount rates, planned growth rates, and estimates of residual value. For our Europe and North America reporting units, we used a market-based weighted average cost of capital of 7.1% to discount projected cash flows of those operations. For our Latin America and AMEA reporting units, we used a risk-rated discount rate of 10.1% to discount projected cash flows from those operations. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans, industry conditions and economic conditions based on available information. Given the uncertainty of the global macroeconomic environment, those estimates could be significantly different than future performance. While all reporting units passed our annual impairment testing, if planned business performance expectations are not met or specific valuation factors outside our control, such as discount rates, changes significantly, then the estimated fair values of a reporting unit might decline and lead to a goodwill impairment in the future. Our 2023 annual testing of indefinite-life intangible assets resulted in an impairment of $26 million related to a chocolate brand in the North America segment and a biscuit brand in the Europe segment. The impairments were driven by changes in projections as a result of current and expected operating environment. The impairment charges were calculated as the excess of the carrying value over the estimated fair value of the intangible assets on a global basis and were recorded within asset impairment and exit costs. We use several accepted valuation methods, including Relief from Royalty, excess earnings and excess margin. The valuation methods utilize estimates of future sales, earnings growth rates, royalty rates and discount rates to determine the fair value of each intangible asset. We identified thirteen brands that each had a fair value in excess of book value of 10% or less. The aggregate book value of the thirteen brands was $3.5 billion as of September 30, 2023, of which $1.8 billion is related to five recently acquired brands. We believe our current plans for each of these brands will allow them to not be impaired, but if plans to grow brand earnings and expand margin are not met or specific valuation factors outside of our control, such as discount rates, change then a brand or brands could become impaired in the future.

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