Goodwill and Other Intangible Assets

12 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

6. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill are as follows:


(in millions)	Americas		EMEA		Asia		Total




Balance at September 30, 2018	$	642	$	469	$	1,071	$	2,182



Currency translation and other	(4)		(40)		12		(32)
Balance at September 30, 2019	$	638	$	429	$	1,083	$	2,150
Business divestitures	(21)		(80)		—		(101)
Currency translation and other	(11)		19		—		8
Balance at September 30, 2020	$	606	$	368	$	1,083	$	2,057

Adient evaluates its goodwill for impairment on an annual basis, or as facts and circumstances warrant. Due to the COVID-19 pandemic and the significant interruption it has caused to Adient’s operations, Adient tested goodwill for impairment for each of its reporting units for the quarter ended March 31, 2020 and also performed its annual goodwill test during the fourth quarter of fiscal 2020 using a fair value method based on management's judgments and assumptions regarding future cash flows. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. Adient estimated the fair value of each of its reporting units using an income approach, which utilized Level 3 unobservable inputs. These calculations contain uncertainties as they require management to make assumptions about market comparables, future cash flows, and the appropriate discount rates (based on weighted average cost of capital ranging from 15.0% to 17.5% as of March 31, 2020 and 16.0% to 18.5% as of September 30, 2020) to reflect the risk inherent in the future cash flows and to derive a reasonable enterprise value and related premium. The estimated future cash flows reflect management's latest assumptions of the financial projections based on current and anticipated competitive landscape, including estimates of revenue based on production volumes over the foreseeable future and long-term growth rates, and operating margins based on historical trends and future cost containment activities. The financial projections also considered the impact that COVID-19 is having on Adient’s current and future operations as well as the impact to new vehicle sales in future years. As a result of the tests, there was no goodwill impairment recorded during the quarter ended March 31, 2020 or during the fourth quarter of fiscal 2020. A change in any of these estimates and assumptions, especially as it relates to the extent of the COVID-19 pandemic’s impacts on vehicle production volumes within the automotive

industry as well as the demand for new vehicle sales once the current operational interruptions are over, could produce significantly lower fair values of Adient's reporting units, which could have a material impact on its results of operations.

During fiscal 2019, as a result of the change in reportable segments during the second quarter, Adient conducted goodwill impairment analyses of the newly allocated goodwill balances under the new reportable segment structure and identified no impairment. Adient also performed its annual goodwill impairment test during the fourth quarter of fiscal 2019 resulting in no goodwill impairment. During the second quarter of fiscal 2018, Adient conducted goodwill impairment analyses of the allocated goodwill balances under the reportable segment structure at that time. Adient also performed its annual goodwill impairment test during the fourth quarter of fiscal 2018. Adient performed these impairment reviews for its reporting units, which had been determined to be Adient's reportable segments, using a fair value method based on management's judgments and assumptions or third party valuations. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. Adient estimated the fair value of its reportable segments using both a multiple of earnings approach and an income approach, both of which utilized Level 3 unobservable inputs. These calculations contained uncertainties as they required management to make assumptions about market comparables, future cash flows, the appropriate discount rate (based on weighted average cost of capital) and growth rate to reflect the risk inherent in the future cash flows. The estimated future cash flows reflected management's latest assumptions of the financial projections based on current and anticipated competitive landscape and product profitability based on historical trends. A change in any of these estimates and assumptions could produce a different fair value, which could have a material impact on Adient's results of operations. As a result of the second quarter 2018 goodwill analyses, Adient determined that goodwill associated with its seat structure and mechanism operations was fully impaired. Consequently, a pre-tax goodwill impairment charge of $299 million was recognized in the consolidated statements of income (loss) within the restructuring and impairment costs line item. The goodwill impairment charge represented a triggering event for additional impairment considerations of other long-lived assets, including an analysis of the recoverability of long-lived assets as of March 31, 2018. No further goodwill or other long-lived asset impairments were identified during the second quarter of fiscal 2018. No goodwill impairments were identified as of September 30, 2018. Refer to Note 16, "Impairment of Long-Lived Assets," of the notes to the consolidated financial statements for information on long-lived asset impairment charges.

Adient's other intangible assets, primarily from business acquisitions valued based on independent appraisals, consisted of:


	September 30, 2020						September 30, 2019
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Intangible assets
Patented technology	$	27	$	(19)	$	8	$	27	$	(17)	$	10
Customer relationships	424		(103)		321		494		(129)		365
Trademarks	41		(27)		14		51		(32)		19
Miscellaneous	110		(10)		100		21		(10)		11
Total intangible assets	$	602	$	(159)	$	443	$	593	$	(188)	$	405

As part of the Yanfeng transaction, which closed during the fourth quarter of fiscal 2020, an intangible asset of $92 million was recorded associated with the YFAS joint venture extension to 2038 (reflected in the Miscellaneous line in the table above), to be amortized over the 18-year term of the extension.

Adient evaluates its other intangible assets for impairment as facts and circumstances warrant. During the third quarter of fiscal 2020, a pre-tax non-cash impairment of $27 million was recorded in the Asia segment related to customer relationship intangible assets of $24 million and other long-lived assets of $3 million within the Futuris China business due to an overall decline in forecasted operations within that business. During the second quarter of fiscal 2019, of the $66 million long-lived asset impairment charge recognized, $4 million was attributable to a customer relationship intangible asset. The impairments were calculated based on a fair value method using discounted cash flows that involves the use of management judgements and estimates related to forecasted revenue, operating costs and discount rates. During the fourth quarter of fiscal 2018, of the $787 million long-lived asset impairment charge recognized, $19 million was attributable to a customer relationship intangible asset. Refer to Note 18, “Segment Information,” and Note 16, "Impairment of Long-Lived Assets," of the notes to the consolidated financial statements for additional information.

Amortization of other intangible assets for the fiscal years ended September 30, 2020, 2019 and 2018 was $37 million, $40 million and $47 million, respectively. Adient anticipates amortization for fiscal 2021, 2022, 2023, 2024 and 2025 will be approximately $35 million, $34 million, $33 million, $31 million and $29 million, respectively.