Goodwill and Other Intangibles

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLES

We evaluate goodwill and indefinite lived intangibles for impairment annually on October 1.

Goodwill

The Company performs a quantitative analysis using a discounted cash flow model and other valuation techniques, but may elect to perform a qualitative analysis.

In performing a quantitative assessment, we estimate fair value using the best information available to us, including market information and discounted cash flow projections also referred to as the income approach. The income approach uses operating segments projection of estimated operating results and cash flows that are discounted using a weighted-average cost of capital that is determined based on current market conditions. The projection uses management’s best estimates of economic and market conditions over the projected period including growth rates in sales, costs and number of units, estimates of future expected changes in operating margins and cash expenditures. Other estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. The estimated fair value of each operating segment is compared to their respective carrying values.

Sensitivity analyses were performed around these assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values. Additionally we validate our estimates of fair value under the income approach by comparing the values to fair value estimates using a market approach. A market approach estimates fair value by applying cash flow multiples to the reporting unit’s operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics of the reporting units. We consider the implied control premium and conclude whether the implied control premium is reasonable based on other recent market transactions.

If the estimated fair value of the reporting unit is less than its carrying value, the Company then performs additional analysis to determine if the reporting unit’s goodwill should be impaired.

If actual results are not consistent with managements’ estimate and assumptions, goodwill may be overstated and a charge against net income would be required, which would adversely affect the Company’s financial statements.

We performed our assessment as of October 1, 2015, and determined there was no impairment of goodwill.

The following table summarizes goodwill attributable to our operating segments at December 31, 2015 and:



Millions of dollars	2015		2014
North America	$	1,732	$	1,715
EMEA	832		639
Latin America	3		4
Asia	439		449
Total	$	3,006	$	2,807

The change in the carrying value of goodwill was primarily due to purchase price allocations and the impact of foreign currency. Further discussion of purchase price allocations can be found in Note 2.

Other Intangible Assets

Based on the results of our annual assessment as of October 1, 2015, we determined that there were no impairments to our intangibles in 2015. In 2014 we recognized a $12 million impairment charge within selling, general and administrative expense of our EMEA operating segment related to two European trademarks which had a pre-impairment carrying value of $30 million in 2014.

Amortization expense was $74 million and $33 million for the years ended December 31, 2015 and 2014, respectively.

The following table summarizes other intangible assets at December 31, 2015 and 2014:



	2015							2014
Millions of dollars	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Other intangible assets, finite lives:
Customer relationships ⁽¹⁾	632		(200		)	$	432	665		$	(163	)	$	502
Patents and other ⁽²⁾	359		(127		)	232		348		(104		)	244
Total other intangible assets, finite lives	$	991	$	(327	)	$	664	$	1,013	$	(267	)	$	746
Trademarks, indefinite lives	2,014		—			2,014		2,057		—			2,057
Total other intangible assets	$	3,005	$	(327	)	$	2,678	$	3,070	$	(267	)	$	2,803

^{(1) Customer relationships have an estimated useful life of}⁴^to¹⁸^years.

^{(2) Patents and other intangibles have an estimated useful life of}¹^to¹⁵^years.

The change in the gross carrying value of other intangible assets was primarily due to the impact of foreign currency.

The following table summarizes our future estimated amortization expense by year:



Millions of dollars
2016	$	73
2017	70
2018	68
2019	65
2020	55

- 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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