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Business Acquisition | 6 Months Ended
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Jun. 30, 2018
Business Combinations [Abstract] |
Business Acquisition | BUSINESS ACQUISITION On July 3, 2017, we closed the Transactions to combine GE O&G and Baker Hughes. The Transactions were executed using a partnership structure, pursuant to which GE O&G and Baker Hughes each contributed their operating assets to a newly formed partnership, BHGE LLC. The fair value of the consideration exchanged was $24,798 million. The tables below present the fair value of assets acquired and liabilities assumed and the associated fair value of the noncontrolling interest related to the acquired net assets of Baker Hughes. The final determination of the fair value of assets and liabilities was concluded in the second quarter of 2018.
Identifiable assets acquired and liabilities assumed | Fair value at July 3, 2017
Assets |
Cash and equivalents | $ | 4,133 |
Current receivables | 2,342 |
Inventories | 1,712 |
Property, plant and equipment | 4,514 |
Intangible assets (1) | 4,005 |
All other assets | 1,335 |
Liabilities |
Accounts payable | (1,213 | )
Borrowings | (3,370 | )
Deferred income taxes (2) | (258 | )
Liabilities for pension and other postretirement benefits | (654 | )
All other liabilities | (1,676 | )
Total identifiable net assets | $ | 10,870 |
Noncontrolling interest associated with net assets acquired | (35 | )
Goodwill (3) | 13,963 |
Total purchase consideration | $ | 24,798 |
(1) | Intangible assets, as provided in the table below, are recorded at fair value, as determined by management based on available information. The estimated useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows. We consider the Baker Hughes trade name to be an indefinite life intangible asset, which will not be amortized and will be subject to an annual impairment test.
| Fair Value | Estimated Weighted Average Life (Years)
Trade name - Baker Hughes | $ | 2,100 |  | Indefinite life
Customer relationships | 1,240 |  | 15
Patents and technology | 465 |  | 10
In-process research and development | 70 |  | Indefinite life
Capitalized software | 64 |  | 2
Trade names - other | 45 |  | 10
Favorable lease contracts & others | 21 |  | 10
Total | $ | 4,005 |  |
(2) | Includes approximately $500 million of net deferred tax liabilities related to the fair value of intangible assets included in the purchase consideration and approximately $242 million of other net deferred tax assets, including non-U.S. loss carryforwards net of valuation allowances partially offset by liabilities for unrecognized benefits.
(3) | Goodwill represents the excess of the total purchase consideration over fair value of the net assets recognized and represents the future economic benefits that we believe will result from combining the operations of GE O&G and Baker Hughes, including expected future synergies and operating efficiencies. Goodwill resulting from the Transactions has been primarily allocated to the Oilfield Services segment, of which $67 million is deductible for tax purposes. See "Note 6. Goodwill and Other Intangible Assets" for allocation of goodwill to all the segments.
During the six months ended June 30, 2018, the Company made measurement period adjustments to reflect facts and circumstances in existence as of the acquisition date. These adjustments resulted in an increase in goodwill from 2017 year end of $911 million primarily due to a reduction in the fair value of property, plant and equipment of $362 million, equity method investments of $228 million, intangible assets of $123 million and an increase in other liabilities of $314 million primarily related to uncertain tax positions, warranty, and other sundry liabilities. As a result of the decrease in property, plant and equipment and intangible assets during the six months ended June 30, 2018, we recorded a cumulative decrease to depreciation and amortization expense of $33 million. We reclassified certain balances to conform to our current presentation. INCOME TAXES BHGE LLC is treated as a partnership for U.S. federal income tax purposes. As such, BHGE LLC is not itself subject to U.S. federal income tax under current U.S. tax laws. BHGE LLC's foreign subsidiaries, however, have incurred current and deferred foreign income taxes. The members of BHGE LLC are each required to take into account for U.S. federal income tax purposes their distributive share of the items of income, gain, loss and deduction of BHGE LLC, which generally includes our U.S. operations. BHGE and GE are each taxed on their distributive share of income and gain, whether or not a corresponding amount of cash or other property is distributed to them. For assets held indirectly by BHGE LLC through subsidiaries, the taxes attributable to those subsidiaries will be reflected in our condensed consolidated and combined financial statements. MERGER AND RELATED COSTS Acquisition costs of $50 million and $85 million, during the three months ended June 30, 2018 and 2017, respectively, and $96 million and $151 million during the six months ended June 30, 2018 and 2017, respectively, were expensed as incurred and were reported as merger and related costs. Such costs include professional fees of advisors and integration and synergy costs related to the combination of Baker Hughes and GE O&G. UNAUDITED PRO FORMA INFORMATION The following unaudited pro forma information has been presented as if the Transactions occurred on January 1, 2016. This information has been prepared by combining the historical results of GE O&G and historical results of Baker Hughes. The unaudited pro forma combined financial data for all periods presented were adjusted to give effect to pro forma events that 1) are directly attributable to the Transactions, 2) factually supportable, and 3) expected to have a continuing impact on the consolidated results of operations. The adjustments are based on information available to the Company at this time. Accordingly, the adjustments are subject to change and the impact of such changes may be material. The unaudited pro forma results do not include any incremental cost savings that may result from the integration. The unaudited combined pro forma information is for informational purposes only and is not necessarily indicative of what the combined company's results actually would have been had the acquisition been completed as of the beginning of the periods as indicated. In addition, the unaudited pro forma information does not purport to project the future results of the combined company. Significant adjustments to the pro forma information below include recognition of non-recurring direct incremental acquisition costs in 2016 and exclusion of those costs from all other periods presented; amortization associated with an estimate of the acquired intangible assets; depreciation associated with an estimate of the fair value step-up of property, plant and equipment; and reduction of interest expense for fair value adjustments to debt.
| Three Months Ended June 30, 2017 | Six Months Ended June 30, 2017
Revenue | $ | 5,417 |  | $ | 10,741 |
Net loss | (184 | ) | (193 | )
Net loss attributable to the Company | (34 | ) | (31 | )
Basic earnings per Class A common stock | (0.08 | ) | (0.07 | )
Diluted earnings per Class A common stock (1) | (0.08 | ) | (0.07 | )
(1) | The calculation of diluted loss per Class A common stock excludes shares potentially issuable under stock-based incentive compensation plans and the exchange of Class B common stock with Class A common stock under the Exchange Agreement, as their effect, if included, would be anti-dilutive.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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