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Goodwill and Other Intangible Assets, Net | 9 Months Ended
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Sep. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Other Intangible Assets, Net | Goodwill and Other Intangible Assets, Net Goodwill activity for the nine months ended September 30, 2022 is as follows (in millions):
Segments | Net Book Value at December 31, 2021 |  |  | Impairment Charges |  | Foreign Exchange |  | Gross Carrying Amount |  | Accumulated Impairment Charges |  | Net Book Value at September 30, 2022
Commercial Solutions | $ | 747 |  |  |  | $ | — |  |  | $ | — |  |  | $ | 916 |  |  | $ | (169) |  |  | $ | 747 |
Home Appliances | — |  |  |  | — |  |  | — |  |  | 569 |  |  | (569) |  |  | — |
Home Solutions | 164 |  |  |  | (108) |  |  | — |  |  | 2,567 |  |  | (2,511) |  |  | 56 |
Learning and Development | 2,593 |  |  |  | — |  |  | (96) |  |  | 3,343 |  |  | (846) |  |  | 2,497 |
Outdoor and Recreation | — |  |  |  | — |  |  | — |  |  | 788 |  |  | (788) |  |  | — |
| $ | 3,504 |  |  |  | $ | (108) |  |  | $ | (96) |  |  | $ | 8,183 |  |  | $ | (4,883) |  |  | $ | 3,300 |
During the third quarter of 2022, the Company concluded that a triggering event had occurred for the Home Fragrance reporting unit in the Home Solutions segment, as a result of a downward revision of forecasted cash flows due to softening global demand, as retailers significantly pulled back on orders in an effort to rebalance inventory, and rising interest rates. The decline in global demand is driven primarily by inflationary pressures which are impacting the discretionary spending behavior of consumers. The Company performed a quantitative impairment test and determined that the Home Fragrance reporting unit goodwill was impaired. During the three and nine months ended September 30, 2022 the Company recorded a non-cash impairment charge of $108 million, as the carrying value of the reporting unit exceeded its fair value. A hypothetical 10% reduction in the forecasted earnings before interest, taxes and amortization used in the discounted cash flows to estimate the fair value of the Home Fragrance reporting unit would have resulted in an additional goodwill impairment charge for the remaining carrying value of $56 million. See Footnote 1 for further information. Other intangible assets, net, are comprised of the following (in millions):
| September 30, 2022 |  | December 31, 2021 |  |
| Gross Carrying Amount |  | Accumulated Amortization |  | Net Book Value |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Book Value |  |
Trade names — indefinite life | $ | 1,898 |  |  | $ | — |  |  | $ | 1,898 |  |  | $ | 2,219 |  |  | $ | — |  |  | $ | 2,219 |  |  |
Trade names — other | 158 |  |  | (75) |  |  | 83 |  |  | 159 |  |  | (65) |  |  | 94 |  |  |
Capitalized software | 594 |  |  | (473) |  |  | 121 |  |  | 631 |  |  | (495) |  |  | 136 |  |  |
Patents and intellectual property | 22 |  |  | (16) |  |  | 6 |  |  | 22 |  |  | (14) |  |  | 8 |  |  |
Customer relationships and distributor channels | 1,063 |  |  | (302) |  |  | 761 |  |  | 1,216 |  |  | (303) |  |  | 913 |  |  |
| $ | 3,735 |  |  | $ | (866) |  |  | $ | 2,869 |  |  | $ | 4,247 |  |  | $ | (877) |  |  | $ | 3,370 |  |  |
Amortization expense for intangible assets for the three months ended September 30, 2022 and 2021 was $25 million and $28 million, respectively and $76 million and $91 million for the nine months ended September 30, 2022 and 2021, respectively. During the third quarter of 2022, the Company concluded that a triggering event had occurred for an indefinite-lived tradename in the Home Appliances reporting unit and an indefinite-lived tradename in the Home Fragrance reporting unit in the Home Solutions segment, as a result of a downward revision of forecasted cash flows due to softening global demand, as retailers significantly pulled back on orders in an effort to rebalance inventory and rising interest rates. The decline in global demand is driven primarily by inflationary pressures which are impacting the discretionary spending behavior of consumers. The Company also concluded that a triggering event had occurred for two indefinite-lived tradenames for the Baby reporting unit, in the Learning and Development segment, as a result of rising interest rates and inflationary pressures. The Company performed a quantitative impairment test and determined that the indefinite-lived tradename in the Home Appliances reporting unit and two indefinite-lived tradenames in the Baby reporting unit were impaired. During the three and nine months ended September 30, 2022, the Company recorded an aggregate non-cash impairment charge of $40 million, as the carrying values of these tradenames exceeded their fair values. A hypothetical 10% reduction in forecasted revenue used in the relief from royalty method to determine the fair value of these indefinite-lived intangibles would have resulted in incremental impairment charges in the Home Appliances and Learning and Development segments of $4 million and $5 million, respectively. A quantitative impairment test was also performed for the indefinite-lived tradename in the Home Fragrance reporting unit in the Home Solutions segment, which resulted in no impairment. A hypothetical 10% reduction in the forecasted debt-free cash flows used in the excess earnings method to determine the fair value of the tradename would have resulted in an impairment charge of $21 million. As further described in Footnote 1, the Company has experienced headwinds due to softening global demand and an increased focus by retailers to rebalance inventory levels in light of continued inflationary pressures on consumers, most notably in the Home Appliances and Home Solutions segments. As a result, the Company may identify future triggering events for these segments, other segments or other indefinite-lived tradenames, including the Baby reporting unit goodwill in the Learning and Development segment, which had a carrying value of $645 million and an indefinite-lived tradename in the Outdoor and Recreation reporting unit which had a carrying value of $58 million. Additional impairment testing may be required based on further deterioration of global demand and/or the macroeconomic environment, continued disruptions to the Company’s business, further declines in operating results of the Company’s reporting units and/or tradenames, further sustained deterioration of the Company’s market capitalization, and other factors, which may necessitate changes to estimates or valuation assumptions used in the fair value of the reporting units for goodwill and indefinite-lived intangible tradenames. Although management cannot predict when improvements in macroeconomic conditions will occur, if consumer confidence and consumer spending decline significantly in the future or if commercial and industrial economic activity experiences a sustained deterioration from current levels, it is possible the Company will be required to record impairment charges in the future.

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