Goodwill And Identifiable Intangibles

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

9. Goodwill and Identifiable Intangible Assets

Goodwill

We test goodwill for impairment at least annually, during the second quarter, and on an interim basis if an event or circumstance indicates that there is a triggering event that would make it more likely than not that an impairment loss had been incurred.

During the second quarter ended June 30, 2020, we performed a qualitative assessment of impairment for goodwill for each of our three reporting units. We considered events and circumstances that may affect the fair value of each reporting unit to determine whether it is necessary to perform the quantitative impairment test. We focused on events or circumstances that could affect the significant inputs, including, but not limited to, financial performance, such as negative or declining cash flows, a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods, competitive, economic, industry and market considerations, and other factors that have or could impact each of our reporting

units. If we determine that it is more likely than not that the goodwill is impaired, then we would perform a quantitative impairment test.

The results of our qualitative assessment performed during the second quarter ended June 30, 2020, was that there were no triggering events that would make it more likely than not that an impairment loss to our goodwill has been incurred for any of our three reporting units.

Changes in the net carrying amount of goodwill by segment were as follows:


(in millions)	ACCO Brands North America		ACCO Brands EMEA		ACCO Brands International		Total

Balance at December 31, 2019	$	375.6	$	165.7	$	177.3	$	718.6
Acquisitions	—		—		3.9		3.9
Foreign currency translation	—		5.2		(4.3)		0.9
Balance at September 30, 2020	$	375.6	$	170.9	$	176.9	$	723.4

The goodwill balance is net of $215.1 million of accumulated impairment losses, which occurred prior to December 31, 2016.

Identifiable Intangible Assets

Foroni Acquisition

The valuation of identifiable intangible assets of $11.1 million acquired in the Foroni Acquisition includes an amortizable trade name, "Foroni®," which has been recorded at its estimated fair value. The fair value of the trade name was determined using the relief from royalty method, which is based on the present value of royalty fees derived from projected revenues. The Foroni® trade name is expected to be amortized over 23 years on a straight-line basis.

The gross carrying value and accumulated amortization by class of identifiable intangible assets as of September 30, 2020 and December 31, 2019, was as follows:


	September 30, 2020							December 31, 2019
(in millions)	Gross Carrying Amounts		Accumulated Amortization			Net Book Value		Gross Carrying Amounts		Accumulated Amortization			Net Book Value
Indefinite-lived intangible assets:
Trade names	$	458.5	$	(44.5)	(1)	$	414.0	$	467.3	$	(44.5)	(1)	$	422.8
Amortizable intangible assets:
Trade names	315.2		(93.3)			221.9		316.7		(83.7)			233.0
Customer and contractual relationships	245.2		(158.3)			86.9		241.0		(142.3)			98.7
Patents	5.8		(1.8)			4.0		5.5		(1.4)			4.1
Subtotal	566.2		(253.4)			312.8		563.2		(227.4)			335.8
Total identifiable intangibles	$	1,024.7	$	(297.9)		$	726.8	$	1,030.5	$	(271.9)		$	758.6

(1)Accumulated amortization prior to the adoption of authoritative guidance on goodwill and other intangible assets, at which time further amortization ceased.

The Company's intangible amortization expense was $7.9 million and $8.6 million for the three months ended September 30, 2020 and 2019, respectively, and $24.1 million and $26.8 million for the nine months ended September 30, 2020 and 2019, respectively.

Estimated amortization expense for amortizable intangible assets as of September 30, 2020, for the current year and the next five years is as follows:


(in millions)	2020		2021		2022		2023		2024		2025
Estimated amortization expense(2)	$	32.0	$	28.4	$	24.9	$	22.6	$	21.0	$	19.4

(2) Actual amounts of amortization expense may differ from estimated amounts due to changes in foreign currency exchange rates, additional intangible asset acquisitions, impairment of intangible assets, accelerated amortization of intangible assets and other events.

We test indefinite-lived intangibles for impairment at least annually and on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. We performed this annual assessment, on a qualitative basis, as allowed by GAAP, for our indefinite-lived trade names in the second quarter of 2020 and concluded that no impairment existed.

COVID-19 Impact

We continue to monitor the significant global impact and uncertainty as a result of COVID-19 to assess the outlook for demand for our products and the effect on our business and our overall financial performance. This includes our risk of impairment of our goodwill and indefinite-lived intangible assets. Although the full impact of COVID-19 on demand remains uncertain, with impact varying significantly by geographic region, we remain committed to taking the actions necessary to protect our long-term financial performance expectations and position the Company for long-term growth. We expect the macroeconomic environment will recover in the medium to long-term. As a result of our analysis, and consideration of events and circumstances, we concluded based on the previously conducted annual assessment, on a qualitative basis, no impairment of our goodwill or indefinite-lived intangible assets was triggered as of June 30, 2020.

The implied fair values of all three of our reporting units, more likely than not, exceed their carrying values at September 30, 2020. In addition, we have not identified a triggering event that would cause us to perform a quantitative goodwill impairment analysis. In management’s opinion, the goodwill balance for our ACCO Brands International reporting unit could be at risk for impairment if operating performance does not recover as expected from the current impacts of COVID-19, if we experience negative changes to the long-term outlook for the business, or changes in factors and assumptions which impact the fair value of our reporting units such as low or declining revenue growth rates, depressed operating margins or adverse changes to the discount rates impacting this report unit.