GOODWILL AND OTHER INTANGIBLE ASSETS, NET

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

The following is a reconciliation of goodwill by business segment.


(in millions)	Americas		EMEA		APAC		Hillrom		Total
Balance as of December 31, 2021	$	2,517	$	309	$	224	$	6,786	$	9,836


Acquisition accounting adjustments	—		—		—		25		25
Impairments	—		—		—		(2,785)		(2,785)
Currency translation	(241)		(29)		(22)		(145)		(437)
Balance as of September 30, 2022	$	2,276	$	280	$	202	$	3,881	$	6,639

We assess goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We recognize a goodwill impairment charge for the amount by which a reporting unit's carrying amount exceeds its fair value.

Goodwill Impairments

As described in Note 2, we acquired Hillrom on December 13, 2021 and recognized $6.8 billion of goodwill and $6.0 billion of other intangible assets, including $1.9 billion of indefinite-lived intangible assets, in connection with that acquisition. Our Hillrom segment includes the following three reporting units: Patient Support Systems, Front Line Care and Surgical Solutions. During the third quarter of 2022, we performed trigger-based impairment tests of the goodwill of each of those three reporting units, as well as the indefinite-lived intangible assets, consisting primarily of trade names, that we acquired in connection with the Hillrom acquisition. We performed those tests as of September 30, 2022 due to (a) current macroeconomic conditions, including the rising interest rate environment and broad declines in equity valuations, and (b) reduced earnings forecasts for our three Hillrom reporting units, driven primarily by current shortages of certain component parts used in our products, raw materials inflation and increased supply chain costs. The impairment tests resulted in total pre-tax goodwill impairment charges of $2.8 billion in the third quarter of 2022, consisting of a $1.4 billion goodwill impairment for our Patient Support Systems reporting unit, a $1.0 billion goodwill impairment for our Front Line Care reporting unit and a $0.4 billion goodwill impairment for our Surgical

Solutions reporting unit. See further discussion below for information regarding intangible asset impairment charges recognized during the third quarter of 2022.

The fair values of the reporting units tested for impairment during the third quarter of 2022 were determined based on a discounted cash flow model (an income approach) and earnings multiples (a market approach). Significant inputs to the reporting unit fair value measurements included forecasted cash flows, discount rates, terminal growth rates and earnings multiples. Our reporting unit fair value measurements are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs.

Other intangible assets, net

The following is a summary of our other intangible assets.


							Indefinite-lived intangible assets
(in millions)	Customer relationships		Developed technology, including patents		Other amortized intangible assets		Trade names		In process Research and Development		Total
September 30, 2022
Gross other intangible assets	$	3,447	$	3,752	$	310	$	1,578	$	213	$	9,300
Accumulated amortization	(410)		(1,743)		(220)		—		—		(2,373)
Other intangible assets, net	$	3,037	$	2,009	$	90	$	1,578	$	213	$	6,927
December 31, 2021
Gross other intangible assets	$	3,437	$	3,801	$	344	$	1,910	$	230	$	9,722
Accumulated amortization	(162)		(1,556)		(212)		—		—		(1,930)
Other intangible assets, net	$	3,275	$	2,245	$	132	$	1,910	$	230	$	7,792

Intangible asset amortization expense was $168 million and $68 million for the three months ended September 30, 2022 and 2021, respectively, and $578 million and $199 million for the nine months ended September 30, 2022 and 2021.

Indefinite-lived Intangible Asset Impairments

In addition to the goodwill impairments discussed above, we recognized pre-tax impairment charges of $332 million in the third quarter of 2022 to reduce the carrying amounts of certain indefinite-lived intangible assets, which related to trade names acquired in the Hillrom acquisition, to their estimated fair values. Those intangible asset impairment charges are classified within cost of sales in the accompanying condensed consolidated statements of income (loss) for the three and nine months ended September 30, 2022.

The fair values of the indefinite-lived intangible assets tested for impairment were determined using a discounted cash flow model and significant inputs included forecasted cash flows, royalty rates and discount rates. Our indefinite-lived intangible asset fair value measurements are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs.