Goodwill And Intangible Assets

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The table below summarizes changes in the carrying amount of goodwill by business segment.



Dollars in millions	Technology & Consulting		Engineering & Construction			Government Services		Other		Subtotal			Non-strategic Business			Total
Balance as of January 1, 2014:
Gross goodwill	$	31	$	528		$	60	$	—	$	619		$	331		$	950
Accumulated impairment losses	—		—			—		—		—			(178		)	(178		)
Net goodwill as of January 1, 2014	$	31	$	528		$	60	$	—	$	619		$	153		$	772
Impairment loss	$	—	$	(293	)	$	—	$	—	$	(293	)	$	(153	)	$	(446	)
Net foreign exchange difference	$	—	$	(2	)	$	—	$	—	$	(2	)	$	—		$	(2	)

Balances as of December 31, 2014:
Gross goodwill	$	31	$	526		$	60	$	—	$	617		$	331		$	948
Accumulated impairment losses	—		(293		)	—		—		(293		)	(331		)	(624		)
Net goodwill as of December 31, 2014	$	31	$	233		$	60	$	—	$	324		$	—		$	324
Impairment loss	$	—	$	—		$	—	$	—	$	—		$	—		$	—
Net foreign exchange difference	$	—	$	—		$	—	$	—	$	—		$	—		$	—

Balance as of December 31, 2015:
Gross goodwill	$	31	$	526		$	60	$	—	$	617		$	331		$	948
Accumulated impairment losses	—		(293		)	—		—		(293		)	(331		)	(624		)
Net goodwill as of December 31, 2015	$	31	$	233		$	60	$	—	$	324		$	—		$	324

Goodwill Impairment

We perform our annual goodwill impairment test as of October 1 of each year. The first step in performing a goodwill impairment test is to identify potential impairment by comparing the estimated fair value of the reporting unit to its carrying value. At the annual testing date of October 1, 2015, we had six reporting units with goodwill balances. The fair values of all our reporting units exceeded their carrying values which implied that goodwill was not impaired.

The fair values of the reporting units were determined using a combination of two methods, one utilizing market earnings multiples (the market approach) and the other derived from discounted cash flow models with estimated cash flows based on internal forecasts of revenues and expenses over a specified period plus a terminal value (the income approach). Under the market approach, we estimate fair value by applying earnings and revenue market multiples to a reporting unit’s operating performance for the trailing twelve-month period. The income approach estimates fair value by discounting each reporting unit’s estimated future cash flows using a weighted-average cost of capital that reflects current market conditions and the risk profile of the reporting unit. To arrive at our future cash flows, we use estimates of economic and market assumptions, including growth rates in revenues, costs, estimates of future expected changes in operating margins, tax rates and cash expenditures or inflows. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements.

In connection with our December 2014 reorganization, we decided we would no longer bid on certain types of work and also exited certain non-strategic businesses. This decision resulted in a significant reduction in our forecasts of future cash flows for three of our previous reporting units and triggered a goodwill impairment test. The result of the first step of our goodwill impairment test indicated the carrying values of the three reporting units exceeded their fair values, prompting us to perform the second step of the goodwill impairment test in order to measure the amount of the potential impairment loss, if any. As a result, we recorded a noncash goodwill impairment charge of $446 million in "impairment of goodwill" on our consolidated statements of operations for the year ended December 31, 2014.

The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill to the carrying value of that goodwill. Step two requires significant unobservable inputs (Level 3 fair value measurements) in the calculation. We determine the implied fair value of goodwill in the same manner as we use in determining the amount of goodwill to be recognized in a business combination. Applying this methodology, we assigned the fair value of the respective reporting unit estimated in step one to all the assets and liabilities of the respective reporting unit. The implied fair value of the reporting unit's goodwill is the excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities. The result of our step two test indicated that the carrying value of each of the three reporting unit's goodwill exceeded the implied fair value of their goodwill.

Intangible Assets

Intangible assets are comprised of customer relationships, trade names, licensing agreements and other. The cost and accumulated amortization of our intangible assets were as follows:



	December 31,
Dollars in millions	2015			2014
Intangibles not subject to amortization	$	11		$	11
Intangibles subject to amortization (a)	115			126
Total intangibles	126			137
Accumulated amortization of intangibles	(91		)	(96		)
Net intangibles	$	35		$	41


(a)	The reduction in intangibles subject to amortization is due to our business dispositions during 2015.

Intangibles that are not subject to amortization are reviewed annually for impairment or more often if events or circumstances change that would create a triggering event. Intangibles subject to amortization are amortized over their estimated useful lives of up to 25 years. Intangibles subject to amortization are impaired if the carrying value of the intangible is not recoverable and exceeds its fair value. In conjunction with our 2014 annual goodwill impairment analysis, we performed an undiscounted cash flow analysis which indicated impairment of certain trade names and customer relationship intangibles associated with our 2010 Roberts & Schaefer Company ("R&S") acquisition. See Note 9 to our consolidated financial statements for discussion on impairment of intangible assets.

Our intangibles amortization expense is presented below:



	Years ended December 31,
Dollars in millions	2015		2014		2013
Intangibles amortization expense	$	4	$	11	$	14

Our expected intangibles amortization expense for the next five years is presented below:



Dollars in millions	Expected future intangibles amortization expense
2016	$	3
2017	$	3
2018	$	3
2019	$	3
2020	$	1
Beyond 2020	$	11

- 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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