GOODWILL AND OTHER INTANGIBLE ASSETS, NET

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

The following is a reconciliation of goodwill by segment.


(in millions)	Americas		EMEA		APAC		Medical Products and Therapies		Healthcare Systems and Technologies1		Pharmaceuticals		Kidney Care		Total
Balance as of December 31, 2022	$	1,965	$	289	$	210	$	—	$	3,988	$	—	$	—	$	6,452
Currency translation and other	(27)		(4)		(3)		(2)		(7)		(1)		(1)		(45)
Reallocation of goodwill	(1,938)		(285)		(207)		1,195		—		542		693		—



Balance as of September 30, 2023	$	—	$	—	$	—	$	1,193	$	3,981	$	541	$	692	$	6,407

1 Prior to the third quarter of 2023, our Healthcare Systems and Technologies segment was referred to as our Hillrom segment.

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.

Change in Reportable Segments

As discussed in Note 16, Segment Information, our reportable segments were previously comprised of the following geographic segments related to our legacy Baxter business: Americas (North and South America), EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific), and a global segment for our Hillrom business. In the third quarter of 2023, we completed the implementation of a new operating model intended to simplify and streamline our operations and better align our manufacturing and supply chain to our commercial activities. Our segments were changed during the third quarter of 2023 to align with our new operating model. Our business is comprised of four segments under this new operating model: Medical Products and Therapies, Healthcare Systems and Technologies (formerly referred to as our Hillrom segment), Pharmaceuticals and Kidney Care. As a result of this segment change, we reallocated the goodwill from our previous Americas, EMEA and APAC segments to the reporting units within our new Medical Products and Therapies, Pharmaceuticals and Kidney Care segments based on the relative fair values of those reporting units. We also performed goodwill impairment assessments of all of our reporting units during the third quarter of 2023, including both our legacy reporting units and the reporting units of our new segments, and we did not identify any goodwill impairments.

Goodwill Impairments

We acquired Hill-Rom Holdings, Inc. in December 2021 and recognized $6.83 billion of goodwill and $6.03 billion of other intangible assets, including $1.91 billion of indefinite-lived intangible assets, in connection with that acquisition. During the third quarter of 2022, we performed trigger-based impairment tests for each of the reporting units within our Hillrom segment (currently referred to as our Healthcare Systems and Technologies segment), 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 Hillrom reporting units, driven primarily by shortages of certain component parts used in our products, raw materials inflation and increased supply chain costs. Those impairment tests resulted in total pre-tax goodwill impairment charges of $2.79 billion in the third quarter of 2022.

The fair values of the reporting units for which impairments were recognized during the third quarter of 2022 were determined based on a discounted cash flow model (an income approach) and earnings multiples (a market approach) based on the guideline public company method. Significant assumptions used in the determination of the fair values of our reporting units generally include forecasted cash flows, discount rates, terminal growth rates and earnings multiples. The discounted cash flow models used to determine the fair values of our reporting units during 2022 reflected our most recent cash flow projections, discount rates ranging from 9% to 10% and terminal growth rates ranging from 2% to 3%. Our reporting unit fair value measurements are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs.

See further discussion below for information regarding Hillrom indefinite-lived intangible asset impairment charges recognized during the third quarter of 2022.

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, 2023
Gross other intangible assets	$	3,442	$	3,778	$	320	$	1,571	$	163	$	9,274
Accumulated amortization	(631)		(2,161)		(252)		—		—		(3,044)
Other intangible assets, net	$	2,811	$	1,617	$	68	$	1,571	$	163	$	6,230
December 31, 2022
Gross other intangible assets	$	3,442	$	3,836	$	325	$	1,571	$	202	$	9,376
Accumulated amortization	(460)		(1,888)		(235)		—		—		(2,583)
Other intangible assets, net	$	2,982	$	1,948	$	90	$	1,571	$	202	$	6,793

Intangible asset amortization expense was $162 million and $168 million for the three months ended September 30, 2023 and 2022, respectively, and $481 million and $578 million for the nine months ended September 30, 2023 and 2022, respectively.

Intangible Asset Impairments

Impairment of Developed Technology Intangible Asset Related to HD Business

In the third quarter of 2023, we reviewed the long-lived assets of our HD reporting unit for potential impairment and recognized a $77 million impairment of developed technology intangible assets, in addition to other impairments of property, plant and equipment and operating lease right-of-use assets.

See Note 3, Supplemental Financial Information, for information about the impairment of this intangible asset, impairments of other long-lived assets related to our HD business and related fair value measurements.

Impairment of Indefinite-Lived Intangible Assets from Our Hillrom Acquisition

In the third quarter of 2022, we recognized pre-tax impairment charges of $332 million to reduce the carrying amounts of certain indefinite-lived intangible assets, which primarily related to the Hillrom and Welch Allyn 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 consolidated statements of income (loss) for the three and nine months ended September 30, 2022.

The fair values of the trade name intangible assets were determined using the relief from royalty method. Significant assumptions used in the determination of the fair values of the trade name intangible assets included revenue growth rates, terminal growth rates, discount rates and royalty rates. The relief from royalty models used in the determination of the fair values of our trade name intangible assets during 2022 reflected our most recent revenue projections, a discount rate of 9.5%, royalty rates ranging from 3% to 5% and terminal growth rates ranging from 2% to 3%. Our trade name intangible asset fair value measurements are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs.