GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2015

GOODWILL AND OTHER INTANGIBLES [Abstract]

Goodwill is recognized as the excess cost of an acquired entity over the amount assigned to assets acquired and liabilities assumed. Goodwill is not amortized, but rather tested for impairment on an annual basis and more often if circumstances require. Impairment losses are recognized whenever the implied fair value of goodwill is less than its carrying value.

The changes in the carrying amount of goodwill by segment are as follows (in thousands of dollars):



	United States		Canada			Other Businesses			Total
Balance at January 1, 2014	$	180,498	$	144,588		$	200,381		$	525,467
Acquisitions	—		9,620			—			9,620
Purchase price adjustments	21,522		—			—			21,522
Impairment	—		—			(11,795		)	(11,795		)
Translation	—		(13,019		)	(24,890		)	(37,909		)
Balance at December 31, 2014	202,020		141,189			163,696			506,905
Acquisitions	—		—			114,903			114,903
Purchase price adjustments	—		—			—			—
Impairment	—		—			—			—
Translation	—		(22,660		)	(16,812		)	(39,472		)
Balance at December 31, 2015	$	202,020	$	118,529		$	261,787		$	582,336



Cumulative goodwill impairment charges, December 31, 2015	$	17,038	$	32,265	$	23,055	$	72,358

Business acquisitions result in the recording of goodwill and identified intangible assets which affect the amount of amortization expense and possible impairment write-downs that may occur in future periods. Grainger annually reviews goodwill and intangible assets with indefinite lives for impairment in the fourth quarter and when events or changes in circumstances indicate the carrying value of these assets might exceed their current fair values. Grainger tests for goodwill impairment at the reporting unit level and performs a qualitative assessment of factors such as a reporting unit's current performance and overall economic factors to determine if it is more likely than not that the goodwill might be impaired and whether it is necessary to perform the two-step quantitative goodwill impairment test. In the two-step test, Grainger compares the carrying value of assets of the reporting unit to its calculated fair value. If the carrying value of assets of the reporting unit exceeds its calculated fair value, the second step is performed, where the implied fair value of goodwill is compared to the carrying value of that goodwill, to determine the amount of impairment.

The fair value of reporting units is calculated primarily using the discounted cash flow (DCF) method and incorporating value indicators from a market approach to evaluate the reasonableness of the resulting fair values. The DCF method incorporates various assumptions including the amount and timing of future expected cash flows, including revenues, gross margins, operating expenses, capital expenditures and working capital based on operational budgets, long range strategic plans and other estimates. The terminal value growth rate is used to calculate the value of cash flows beyond the last projected period and reflects management’s best estimates for perpetual growth for the reporting units. Estimates of market-participant risk-adjusted weighted average cost of capital are used as a basis for determining the discount rates to apply to the reporting units’ future expected cash flows and terminal value.

Grainger completed the annual impairment testing during the fourth quarter of 2015, including the quantitative test for Fabory, with $106 million of goodwill. The fair value of the Fabory reporting unit's goodwill exceeded the carrying value by 15%, and the step two calculation was not required for this reporting unit. For the Company's remaining reporting units, the estimated fair values substantially exceeded the carrying values.

Intangible assets - net in the Consolidated Balance Sheets were comprised of the following (in thousands of dollars):



		As of December 31,
		2015						2014
	Weighted average life	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Customer lists and relationships	14.3 years	$	452,429	$	148,424	$	304,005	$	316,994	$	133,819	$	183,175
Trademarks, trade names and other	14.3 years	25,764		13,051		12,713		27,235		10,820		16,415
Non-amortized trade names		146,576		—		146,576		64,340		—		64,340
Total intangible assets	14.3 years	$	624,769	$	161,475	$	463,294	$	408,569	$	144,639	$	263,930

The increase of $216 million in the gross carrying amount for total intangible assets was primarily driven by the Cromwell acquisition. See Note 2 to the Consolidated Financial Statements.

Amortization expense recognized on intangible assets was $20 million, $18 million and $15 million for the years ended December 31, 2015, 2014 and 2013, respectively, and is included in Warehousing, marketing and administrative expenses on the Consolidated Statement of Earnings.

Estimated amortization expense for future periods is as follows (in thousands of dollars):



Year	Expense
2016	$	25,935
2017	24,868
2018	23,914
2019	23,914
2020	23,479
Thereafter	194,608

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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