Goodwill and Intangibles

Goodwill

MPLX annually evaluates goodwill for impairment as of November 30, as well as whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit with goodwill is less than its carrying amount. MPLX has 12 reporting units, eight of which had goodwill totaling approximately $2.6 billion as of November 30, 2018. MPLX performed its annual impairment tests, and no impairments in the carrying value of goodwill were identified. Significant assumptions used to estimate the reporting units’ fair value include the discount rate as well as estimates of future cash flows, which are impacted primarily by commodity prices and producer customers’ development plans (which impact volumes and capital requirements).

During the first quarter of 2016, MPLX determined that an interim impairment analysis of the goodwill recorded in connection with the MarkWest Merger was necessary based on consideration of a number of first quarter events and circumstances, including (i) continued deterioration of near term commodity prices as well as longer term pricing trends, (ii) recent guidance on reductions to forecasted capital spending, the slowing of drilling activity and the resulting reduced production growth forecasts released or communicated by MPLX’s producer customers and (iii) increases in cost of capital. The combination of these factors was considered to be a triggering event requiring an interim impairment test. Based on the first step of the interim goodwill impairment analysis, the fair value for the three reporting units to which goodwill was assigned in connection with the MarkWest Merger was less than the respective carrying value. In step two of the impairment analysis, the implied fair values of the goodwill were compared to the carrying values within those reporting units. Based on this assessment, it was determined that goodwill was impaired in two of the three reporting units. Accordingly, MPLX recorded an impairment charge of approximately $129 million in the first quarter of 2016. In the second quarter of 2016, MPLX completed its purchase price allocation, which resulted in an additional $1 million of impairment expense that would have been recorded in the first quarter of 2016 had the purchase price allocation been completed as of that date. This adjustment to the impairment expense was the result of completing an evaluation of the deferred tax liabilities associated with the MarkWest Merger and their impact on the resulting goodwill that was recognized.

The fair value of the reporting units for the interim goodwill impairment analysis described above was determined based on applying the discounted cash flow method, which is an income approach, and the guideline public company method, which is a market approach. The discounted cash flow fair value estimate is based on known or knowable information at the interim measurement date. The significant assumptions that were used to develop the estimates of the fair values under the discounted cash flow method included management’s best estimates of the expected future results and discount rates, which range from 10.5 percent to 11.5 percent. The fair value of the intangibles was determined based on applying the multi-period excess earnings method, which is an income approach. Key assumptions included attrition rates by reporting unit ranging from 5.0 percent to 10.0 percent and discount rates by reporting unit ranging from 11.5 percent to 12.8 percent. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the interim goodwill impairment test will prove to be an accurate prediction of the future. The fair value measurements for the individual reporting units’ overall fair values, and the fair values of the goodwill assigned thereto, represent Level 3 measurements.

The changes in carrying amount of goodwill were as follows for the periods presented:



(In millions)	L&S		G&P			Total
Gross goodwill as of December 31, 2016	$	162	$	2,213		$	2,375
Accumulated impairment losses	—		(130		)	(130		)
Balance as of December 31, 2016	162		2,083			2,245
Impairment losses	—		—			—
Acquisitions	—		—			—
Balance as of December 31, 2017	162		2,083			2,245
Impairment losses	—		—			—
Acquisitions	341		—			341
Balance as of December 31, 2018	$	503	$	2,083		$	2,586

Gross goodwill as of December 31, 2018	$	503	$	2,213		$	2,716
Accumulated impairment losses	—		(130		)	(130		)
Balance as of December 31, 2018	$	503	$	2,083		$	2,586

Intangible Assets

MPLX’s intangible assets are comprised of customer contracts and relationships, gross intangible assets with accumulated amortization as of December 31, 2018 and 2017 is shown below:



		December 31, 2018							December 31, 2017
(In millions)	Useful Life	Gross		Accumulated Amortization⁽¹⁾			Net		Gross		Accumulated Amortization⁽¹⁾			Net
L&S	4-6 years	$	9	$	—		$	9	$	—	$	—		$	—
G&P	11-25 years	533		(118		)	415		533		(80		)	453
		$	542	$	(118	)	$	424	$	533	$	(80	)	$	453


(1)	Amortization expense attributable to the G&P segment for the years ended December 31, 2018 and 2017 was $38 million in both years.

Estimated future amortization expense related to the intangible assets at December 31, 2018 is as follows:



(In millions)
2019	$	40
2020	40
2021	40
2022	39
2023	39
Thereafter	226
Total	$	424