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Goodwill and Intangible Assets | 9 Months Ended
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Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets Disclosure | GOODWILL AND INTANGIBLE ASSETS Impairment of Goodwill and Other Indefinite-lived Intangible Assets Goodwill represents the excess of acquisition costs over the fair value of the net tangible assets and identifiable intangible assets acquired in a business combination. Other indefinite-lived intangible assets primarily consist of trademarks acquired in business combinations. Goodwill and other indefinite-lived assets are not amortized, but are subject to impairment testing. The aggregate carrying values of our goodwill and other indefinite-lived intangible assets are subject to an impairment assessment annually as of October 1, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. This assessment compares carrying values of the goodwill reporting units and other indefinite lived intangible assets to their respective fair values and, when appropriate, the carrying value is reduced to fair value. In testing goodwill, the fair value of each reporting unit is estimated using the income approach, a discounted cash flow approach. For the other indefinite lived intangible assets, fair value is estimated using the relief from royalty method. Management utilizes long-term cash flow forecasts and the Company's annual operating plans adjusted for terminal value assumptions. The fair value of the Company's reporting units and other indefinite lived intangible assets are determined utilizing the best estimate of future revenues, operating expenses including commission expense, market and general economic conditions, trends in the industry, as well as assumptions that management believes marketplace participants would utilize including discount rates, cost of capital, trademark royalty rates, and long-term growth rates. The trademark royalty rate was determined by reviewing similar trademark agreements with third parties. Although management believes that assumptions are reasonable, actual results may vary significantly. During the first quarter of 2020, the Company determined that the impact on future earnings related to the COVID-19 pandemic qualified as a triggering event for all of our reporting units and accordingly, the Company performed an impairment assessment of goodwill and other indefinite-lived intangible assets as of March 31, 2020. This assessment resulted in the recognition of an impairment of Realogy Franchise Group trademarks of $30 million and a goodwill impairment of $413 million for Realogy Brokerage Group offset by an income tax benefit of $99 million resulting in a net reduction to Realogy Brokerage Group's carrying value of $314 million. The primary drivers to the impairments were a significant increase in the weighted average cost of capital due to the volatility in the capital and debt markets due to COVID-19 and the related lower projected financial results for 2020. The impairment charges are recorded on a separate line in the accompanying Condensed Consolidated Statements of Operations and are non-cash in nature. These impairment assessments involve the use of accounting estimates and assumptions, changes in which could materially impact our financial condition or operating performance if actual results differ from such estimates and assumptions. To address this uncertainty, a sensitivity analysis is performed on key estimates and assumptions. Under the income approach, management used key valuation assumptions in determining the fair value estimates of the Company's reporting units including a discount rate based on the Company's best estimate of the weighted average cost of capital and a long-term growth rate based on the Company's best estimate of terminal growth rates. As a result of the COVID-19 pandemic which caused volatility in the capital and debt markets, there was a significant increase in the weighted average cost of capital used to discount the future cash flows in the impairment assessment model. The following table provides a comparison of key assumptions used in the Company's impairment assessment performed in the first quarter of 2020 compared to the prior assessment performed in the fourth quarter of 2019:
|  | Weighted Average Cost of Capital |  | Long-term Growth Rates
|  | First Quarter 2020 |  | Fourth Quarter 2019 |  | First Quarter 2020 |  | Fourth Quarter 2019
Realogy Franchise Group |  | 10.0% |  | 8.5% |  | 2.5% |  | 2.5%
Realogy Brokerage Group |  | 11.0% |  | 9.0% |  | 2.0% |  | 2.0%
Realogy Title Group |  | 11.0% |  | 9.5% |  | 2.5% |  | 2.5%
Given the increase in the discount rate and lower projected 2020 financial results in the first quarter 2020 impairment analysis, the estimated excess fair value over carrying value for Realogy Franchise Group and Realogy Title Group was reduced to 7% and 5%, respectively. While management believes the assumptions used in the impairment test are reasonable, a 100 basis point increase in the discount rate, holding other assumptions constant, would result in an impairment of goodwill at Realogy Franchise Group and Realogy Title Group. There is a significant amount of future uncertainty related to the impact of the COVID-19 pandemic. In addition, significant negative industry or economic trends, disruptions to the business, unexpected significant changes or planned changes in use of the assets, a decrease in business results, growth rates that fall below management's assumptions, divestitures, and a sustained decline in the Company's stock price and market capitalization may have a negative effect on the fair values and key valuation assumptions, and such changes could result in changes to management's estimates of fair value and a material impairment of goodwill or other indefinite-lived intangible assets. Goodwill Goodwill by reporting unit and changes in the carrying amount are as follows:
| Realogy Franchise Group |  | Realogy Brokerage Group |  | Realogy Title Group |  | Total Company
Balance at December 31, 2019 | $ | 2,476 |  |  | $ | 669 |  |  | $ | 155 |  |  | $ | 3,300 |
Goodwill acquired | — |  |  | — |  |  | — |  |  | — |
Impairment loss | — |  |  | (413) |  |  | — |  |  | (413) |
Balance at September 30, 2020 | $ | 2,476 |  |  | $ | 256 |  |  | $ | 155 |  |  | $ | 2,887 |
Accumulated impairment losses (a) | $ | 1,160 |  |  | $ | 808 |  |  | $ | 324 |  |  | $ | 2,292 |
_______________ (a)Includes impairment charges which reduced goodwill by $413 million, $237 million, $1,153 million and $489 million during the first quarter of 2020, third quarter of 2019, fourth quarter of 2008 and fourth quarter of 2007, respectively. Intangible Assets Intangible assets are as follows:
| As of September 30, 2020 |  | As of December 31, 2019
| Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Amortizable—Franchise agreements (a) | $ | 2,019 |  |  | $ | 910 |  |  | $ | 1,109 |  |  | $ | 2,019 |  |  | $ | 859 |  |  | $ | 1,160 |
Indefinite life—Trademarks (b) (c) | $ | 643 |  |  |  |  | $ | 643 |  |  | $ | 673 |  |  |  |  | $ | 673 |
Other Intangibles |  |  |  |  |  |  |  |  |  |  |
Amortizable—License agreements (d) | $ | 45 |  |  | $ | 13 |  |  | $ | 32 |  |  | $ | 45 |  |  | $ | 12 |  |  | $ | 33 |
Amortizable—Customer relationships (e) | 71 |  |  | 58 |  |  | 13 |  |  | 71 |  |  | 57 |  |  | 14 |
Indefinite life—Title plant shares (f) | 20 |  |  |  |  | 20 |  |  | 19 |  |  |  |  | 19 |
Amortizable—Other (g) | 23 |  |  | 19 |  |  | 4 |  |  | 27 |  |  | 21 |  |  | 6 |
Total Other Intangibles | $ | 159 |  |  | $ | 90 |  |  | $ | 69 |  |  | $ | 162 |  |  | $ | 90 |  |  | $ | 72 |
_______________ (a)Generally amortized over a period of 30 years. (b)Primarily related to real estate franchise brands which are expected to generate future cash flows for an indefinite period of time. (c)Realogy Franchise Group trademarks was impaired by $30 million during the first quarter of 2020. (d)Relates to the Sotheby’s International Realty® and Better Homes and Gardens® Real Estate agreements which are being amortized over 50 years (the contractual term of the license agreements). (e)Relates to the customer relationships at Realogy Title Group and Realogy Brokerage Group. These relationships are being amortized over a period of 2 to 12 years. (f)Ownership in a title plant is required to transact title insurance in certain states. The Company expects to generate future cash flows for an indefinite period of time. (g)Consists of covenants not to compete which are amortized over their contract lives and other intangibles which are generally amortized over periods ranging from 5 to 10 years. Intangible asset amortization expense is as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Franchise agreements | $ | 17 |  |  | $ | 17 |  |  | $ | 51 |  |  | $ | 51 |
License agreements | 1 |  |  | 1 |  |  | 1 |  |  | 1 |
Customer relationships | — |  |  | — |  |  | 1 |  |  | 2 |
Other | 1 |  |  | 2 |  |  | 3 |  |  | 4 |
Total | $ | 19 |  |  | $ | 20 |  |  | $ | 56 |  |  | $ | 58 |
Based on the Company’s amortizable intangible assets as of September 30, 2020, the Company expects related amortization expense for the remainder of 2020, the four succeeding years and thereafter to be approximately $18 million, $72 million, $70 million, $70 million, $70 million and $858 million, respectively.

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- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
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