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Intangible Assets, net and Goodwill | 12 Months Ended
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Dec. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract] |
Intangible Assets, net and Goodwill | Intangible Assets, net The following tables present certain information regarding our intangible assets as of December 31, 2021 and December 31, 2020. Amortizable intangible assets are being amortized on a straight-line basis over their estimated useful lives with no estimated residual values, which materially approximates the expected pattern of use.
| As of |
| December 31, 2021 |  | December 31, 2020 |
| Gross Carrying Value |  | Accumulated Amortization |  |  | Net Balance |  | Gross Carrying Value |  | Accumulated Amortization |  | Net Balance |
Amortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships | $ | 911 |  |  | $ | (445) |  |  |  | $ | 466 |  |  | $ | 904 |  |  | $ | (384) |  |  | $ | 520 |  |
Intellectual property | 914 |  |  | (670) |  |  |  | 244 |  |  | 893 |  |  | (621) |  |  | 272 |  |
Licenses | 472 |  |  | (380) |  |  |  | 92 |  |  | 472 |  |  | (344) |  |  | 128 |  |
Brand names | 132 |  |  | (97) |  |  |  | 35 |  |  | 127 |  |  | (86) |  |  | 41 |  |
Trade names(1) | 158 |  |  | (54) |  |  |  | 104 |  |  | 112 |  |  | (38) |  |  | 74 |  |
Patents and other | 12 |  |  | (7) |  |  |  | 5 |  |  | 11 |  |  | (6) |  |  | 5 |  |
Total amortizable intangible assets | 2,599 |  |  | (1,653) |  |  |  | 946 |  |  | 2,519 |  |  | (1,479) |  |  | 1,040 |  |
Non-amortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Trade names(1) | — |  |  | — |  |  |  | — |  |  | 50 |  |  | (2) |  |  | 48 |  |
Total intangible assets | $ | 2,599 |  |  | $ | (1,653) |  |  |  | $ | 946 |  |  | $ | 2,569 |  |  | $ | (1,481) |  |  | $ | 1,088 |  |
(1) During the fourth quarter of 2021, a legacy trade name was reclassified to amortizable trade names assets as a result of our rebranding initiatives (see below in this Note 11 for additional details).
The following reflects intangible amortization expense included within D&A:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Amortization expense | $ | 197 |  |  | $ | 207 |  |  | $ | 257 |
Estimated intangible asset amortization expense for the year ending December 31, 2022 and each of the subsequent four years:
| Year Ending December 31,
| 2022 |  | 2023 |  | 2024 |  | 2025 |  | 2026
Amortization expense | $ | 246 |  |  | $ | 190 |  |  | $ | 147 |  |  | $ | 101 |  |  | $ | 87 |
During the fourth quarter of 2021 and as a result of corporate-wide rebranding, we determined that useful lives for certain of our indefinite-lived and finite-lived trade names in our Gaming business segment warrant a change. We first performed an impairment assessment, which indicated that carrying values of these trade names are recoverable (or for our indefinite-lived asset, the estimated fair value was more likely than not in-excess of the carrying value). The change in useful life determination was treated as a change in estimate with a $109 million carrying value of these legacy trade names being amortized on a straight-line basis over a twenty month period beginning in the fourth quarter of 2021, which materially approximates the expected pattern of use over their remaining useful lives and periods over which these legacy trade names will contribute to the future cash flows of the respective asset groups. The incremental expense of this change for the year ended December 31, 2021 was $10 million and is recorded in D&A. Goodwill The table below reconciles the change in the carrying value of goodwill, by business segment, for the period from December 31, 2019 to December 31, 2021.
| Gaming(1) |  |  |  | SciPlay |  | iGaming |  | Totals
Balance as of December 31, 2019 | $ | 2,449 |  |  |  |  | $ | 115 |  |  | $ | 170 |  |  | $ | 2,734 |
Impairment | (54) |  |  |  |  | — |  |  | — |  |  | (54) |
Acquired goodwill | — |  |  |  |  | 7 |  |  | — |  |  | 7 |
Foreign currency adjustments | 30 |  |  |  |  | 2 |  |  | 11 |  |  | 43 |
Balance as of December 31, 2020 | 2,425 |  |  |  |  | 124 |  |  | 181 |  |  | 2,730 |
Acquired goodwill | — |  |  |  |  | — |  |  | 191 |  |  | 191 |
Foreign currency adjustments | (20) |  |  |  |  | 2 |  |  | (11) |  |  | (29) |
Balance as of December 31, 2021 | $ | 2,405 |  |  |  |  | $ | 126 |  |  | $ | 361 |  |  | $ | 2,892 |
(1) Accumulated goodwill impairment charges for the Gaming segment as of December 31, 2021 were $989 million.
Goodwill represents the excess of the purchase price over the fair value of the assets acquired and liabilities assumed of acquired companies. We test goodwill for impairment annually as of October 1 of each fiscal year or more frequently if events arise or circumstances change that indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. We evaluate goodwill at the reporting unit level by comparing the carrying value of each reporting unit to its fair value using a quantitative impairment test or qualitative assessment, as deemed appropriate. Under the qualitative assessment option, we first assess qualitative factors to determine whether the fair value of a reporting unit is not “more than likely” less than its carrying value, which is commonly referred to as “Step 0”. If the fair value of the reporting unit is greater or if it is more likely than not that the fair value of the reporting unit is greater than its carrying value, goodwill is not considered impaired. For reporting units where we perform the quantitative process, we are required to compare the fair value of each reporting unit, which we primarily determine using an income approach based on the present value of discounted cash flows and a market approach, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit is less than its carrying value, an impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value determined based on a quantitative test, not to exceed the total amount of goodwill allocated to that reporting unit. We review our operating segments in accordance with ASC 350 to determine reporting units within our operating segments based on the availability of discrete financial information that is regularly reviewed by segment management. As a result of our Lottery and Sports Betting businesses being reflected as discontinued operations (see Note 2), we reassessed our continuing operations reporting units and determined that we have six reporting units: SG Gaming, U.K. Gaming, Casino Management Systems, Table Products, SciPlay, and iGaming. For business segment information, see Note 3. Our annual goodwill impairment tests as of October 1, 2021 indicated estimated fair values were in excess of their carrying values for each of our reporting units that have goodwill balances. 2020 U.K. Gaming Impairment Charge A substantial portion of our U.K. Gaming reporting unit revenue comes from Ladbrokes Coral Group (acquired by Entain (formerly GVC Holdings PLC) in March 2018), which operates LBOs in the U.K. On April 1, 2019 the maximum stakes limit on fixed odds betting terminals was reduced from £100 to £2. As a result of this change, LBO operators began to rationalize their retail operations, which among other measures has included closure of certain LBO shops. Consequently, as of October 1, 2019, we concluded that an elevated risk of goodwill impairment existed for our U.K. Gaming reporting unit as adverse changes in projections for future operating results or other key assumptions, such as projected revenue, profit margin, capital expenditures or cash flows associated with investments included in that reporting unit could lead to future goodwill impairments. During the first quarter of 2020, the COVID-19 disruptions resulted in the widespread closures of LBO shops across the U.K., which, along with global economic uncertainty, contributed to further deterioration in business conditions from our 2019 annual goodwill test date. This had an adverse effect on our U.K. Gaming reporting unit (part of our Gaming business segment), which necessitated performing a quantitative goodwill impairment test during the first quarter of 2020. We performed this quantitative impairment test by comparing the fair value of our U.K. Gaming reporting unit to its carrying value, including goodwill. The fair value of our U.K. Gaming reporting unit was determined using a combination of both an income approach, based on the present value of discounted cash flows, and a market approach. Due to market volatility and limited market data points specific to the nature of our U.K. Gaming reporting unit operations, we placed greater weight on the income approach than on the market approach. As a result of this analysis, during the first quarter of 2020 we recognized a partial impairment charge totaling $54 million, which is the amount by which the carrying value exceeded the estimated fair value. This impairment charge resulted in no tax benefit. We used projections of revenues, profit margin, operating costs, capital expenditures and cash flows that primarily considered general economic and market conditions and estimated future results including the estimated impact of the COVID-19 disruptions. We used a range of different scenarios and derived estimated fair value based on an equal weighting of these scenarios to reflect the economic uncertainty resulting from the COVID-19 disruptions and the timing and magnitude of the economic recovery following the COVID-19 disruptions coupled with the impact of the regulatory change. The following ranges of the key estimates and assumptions were used in the discounted cash flow analysis: •Revenue growth for FY 2021 between negative 9% and negative 20%, an average revenue growth for FY 2022 to FY 2027 between positive 3% and positive 5%, and terminal revenue growth rate of positive 2.0%; •An average profit margin ranging from 13% to 23%; •Assumptions regarding future capital expenditures reflective of maintaining our current customer contracts; and •An overall discount rate ranging from 8.5% to 10.0%. In our market comparable analysis, we considered revenue and EBITDA multiples ranging from 2.1x to 2.7x and 5.7x to 7.5x, respectively, and ultimately selected multiples at the low end of the range. Other long-lived assets and intangible assets with finite useful lives Intangible assets with finite useful lives are amortized over two to fifteen years using the straight-line method, which materially approximates the pattern of the assets’ use. Factors considered when assigning useful lives include legal, regulatory and contractual provisions, product obsolescence, demand, competition and other economic factors. We assess the recoverability of long-lived assets and intangible assets with finite useful lives whenever events arise or circumstances change that indicate the carrying value of an asset may not be recoverable. Recoverability of long-lived assets (or asset groups) to be held and used is measured by a comparison of the carrying value of the asset (or asset group) to the expected net future undiscounted cash flows to be generated by that asset (or asset group). The amount of impairment of other long-lived assets and intangible assets with finite lives is measured by the amount by which the carrying value of the asset exceeds the fair market value of the asset.

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