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Goodwill and Other Intangible Assets | 9 Months Ended
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Oct. 02, 2020
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Other Intangible Assets | Note K — Goodwill and Other Intangible Assets Goodwill As discussed in Note V — Business Segment Information in these Notes, after the completion of the L3Harris Merger, we adjusted our segment reporting to reflect our new organizational structure effective for the quarter ended September 27, 2019. Immediately before and after our goodwill assignments, we completed an assessment of any potential goodwill impairment under our former and new segment reporting structure and determined that no impairment existed. The assignment of goodwill by business segment, and changes in the carrying amount of goodwill, by business segment, for the three quarters ended October 2, 2020, were as follows:
(In millions) | Integrated Mission Systems |  | Space and Airborne Systems |  | Communication Systems |  | Aviation Systems |  | Total
Balance at January 3, 2020 | $ | 5,768 |  |  | $ | 5,131 |  |  | $ | 4,243 |  |  | $ | 4,859 |  |  | $ | 20,001 |
Goodwill decrease from divestitures(1) | — |  |  | (2) |  |  | (9) |  |  | (530) |  |  | (541) |
Impairment of goodwill | — |  |  | (5) |  |  | — |  |  | (364) |  |  | (369) |
Currency translation adjustments | (3) |  |  | (4) |  |  | (2) |  |  | 1 |  |  | (8) |
Other (including adjustments to previously estimated fair value of assets acquired and liabilities assumed)(2) | 740 |  |  | 112 |  |  | (82) |  |  | (861) |  |  | (91) |
Balance at October 2, 2020 | $ | 6,505 |  |  | $ | 5,232 |  |  | $ | 4,150 |  |  | $ | 3,105 |  |  | $ | 18,992 |
_______________ (1)During the three quarters ended October 2, 2020, we completed the divestiture of three businesses (airport security and automation business, Applied Kilovolts and Analytical Instrumentation business and EOTech business) and derecognized $541 million of goodwill as the part of determining the gain or loss on these divestitures. See Note C — Business Divestitures and Assets Sales in these Notes for additional information. (2)See Note B — Business Combination in these Notes for additional information regarding adjustments to previously estimated fair values of assets acquired and liabilities assumed. Commercial Aviation Solutions Impairment. Indications of potential impairment of goodwill related to our Commercial Aviation Solutions reporting unit (which is part of our Aviation Systems segment) were present at April 3, 2020 and July 3, 2020 due to COVID-19 and its impact on global air traffic and customer operations, which resulted in a decrease in the fiscal 2020 outlook for the reporting unit. Although our cash flow projections for the Commercial Aviation Solutions reporting unit did not change significantly compared with the projected cash flows as of April 3, 2020, we determined it was more-likely-than-not that the fair value of our Commercial Aviation Solutions reporting unit was less than its carrying amount as of July 3, 2020 due to the amount by which the fair value of the Commercial Aviation Solutions reporting unit exceeded its carrying amount as of April 3, 2020 and heightened uncertainty regarding the timing of expected recovery for the overall commercial aviation market. Consequently, in connection with the preparation of our financial statements for the quarters ended April 3, 2020 and July 3, 2020, we performed quantitative impairment tests on an interim basis. To test for potential impairment of goodwill related to our Commercial Aviation Solutions reporting unit, we prepared an estimate of the fair value of the reporting unit based on a combination of market-based valuation techniques, utilizing quoted market prices and comparable publicly reported transactions, and projected discounted cash flows. As a result of these impairment tests, we concluded that goodwill related to our Commercial Aviation Solutions reporting unit was impaired as of April 3, 2020 and July 3, 2020, and we recorded non-cash impairment charges of $296 million (including $28 million attributable to noncontrolling interests) during the quarter ended April 3, 2020 and $54 million (including $8 million attributable to noncontrolling interests) during the quarter ended July 3, 2020. These charges are included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited) for the three quarters ended October 2, 2020 and are primarily not deductible for tax purposes. Other AS Disposal Group Impairment. During the quarter ended July 3, 2020, we determined the criteria to be classified as held for sale were met with respect to the other AS disposal group within our Aviation Systems segment and assigned $14 million of goodwill to the disposal group on a relative fair value basis. In connection with the preparation of our financial statements for the quarter ended July 3, 2020, we concluded that goodwill related to the other AS disposal group was impaired and recorded a non-cash impairment charge of $14 million, which is included in the “Impairment of goodwill and other assets” line item in our Condensed Consolidated Statement of Income (Unaudited) for the three quarters ended October 2, 2020. Identifiable Intangible Assets The most significant identifiable intangible asset that is separately recognized for our business combinations is customer relationships. Our customer relationships are established through written customer contracts (revenue arrangements). The fair value for a customer relationship is determined, as of the date of acquisition of such relationship, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows arising from the follow-on sales expected from the customer relationship over its estimated life, including the probability of expected future contract renewals and sales, less a contributory asset charge, all of which is discounted to present value. We assess the recoverability of the carrying value of our finite-lived identifiable intangible assets whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. We assess the recoverability of the carrying value of indefinite-lived identifiable intangible assets annually, or under certain circumstances more frequently, such as when events and circumstances indicate there may be an impairment. In conjunction with, and in advance of, the interim tests of goodwill related to our Commercial Aviation Solutions reporting unit, we also performed recoverability tests of the long-lived assets of our Commercial Aviation Solutions reporting unit, including identifiable intangible assets and property, plant and equipment. To test these long-lived assets for recoverability, we compared the estimated future cash flows (on an undiscounted basis) to be generated from the use and hypothetical eventual disposition of the asset group to its carrying value and concluded that the long-lived assets of our Commercial Aviation Solutions reporting unit were not impaired at April 3, 2020 or July 3, 2020. Identifiable intangible assets are summarized below:
| October 2, 2020 |  | January 3, 2020
(In millions) | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount(1) |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Customer relationships | $ | 6,923 |  |  | $ | 1,103 |  |  | $ | 5,820 |  |  | $ | 6,518 |  |  | $ | 653 |  |  | $ | 5,865 |
Developed technologies | 670 |  |  | 242 |  |  | 428 |  |  | 768 |  |  | 183 |  |  | 585 |
Contract backlog | 19 |  |  | 15 |  |  | 4 |  |  | — |  |  | — |  |  | — |
Trade names — divisions | 138 |  |  | 43 |  |  | 95 |  |  | 165 |  |  | 35 |  |  | 130 |
Other | 4 |  |  | 3 |  |  | 1 |  |  | 10 |  |  | 4 |  |  | 6 |
Total identifiable intangible assets subject to amortization | 7,754 |  |  | 1,406 |  |  | 6,348 |  |  | 7,461 |  |  | 875 |  |  | 6,586 |
In-process research and development | 21 |  |  | — |  |  | 21 |  |  | 69 |  |  | — |  |  | 69 |
L3 trade name | 1,803 |  |  | — |  |  | 1,803 |  |  | 1,803 |  |  | — |  |  | 1,803 |
Total identifiable intangible assets | $ | 9,578 |  |  | $ | 1,406 |  |  | $ | 8,172 |  |  | $ | 9,333 |  |  | $ | 875 |  |  | $ | 8,458 |
_______________ (1)During the three quarters ended October 2, 2020, we completed the divestiture of three businesses and derecognized $296 million of intangibles as part of the gain or loss on these divestitures. Additionally, in connection with a pending divestiture, we reclassified $5 million of identifiable intangible assets to “Assets of disposal group held for sale” in our Condensed Consolidated Balance Sheet (Unaudited) at October 2, 2020. See Note C — Business Divestitures and Assets Sales in these Notes for additional information regarding divestitures. Amortization expense related to identifiable intangible assets, which primarily relates to the L3Harris Merger, was $179 million and $546 million for the quarter and three quarters ended October 2, 2020, respectively, and $125 million and $181 million for the quarter and three quarters ended September 27, 2019, respectively. Future estimated amortization expense for identifiable intangible assets subject to amortization is as follows:
| (In millions)
Year 1 | $ | 682 |
Year 2 | 685 |
Year 3 | 677 |
Year 4 | 647 |
Year 5 | 598 |
Thereafter | 3,059 |
Total | $ | 6,348 |

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- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
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