GOODWILL & OTHER INTANGIBLE ASSETS
As discussed in Note 2, goodwill arises from the purchase price for acquired businesses exceeding the fair value of tangible and intangible assets acquired less assumed liabilities and non-controlling interests. Management assesses the goodwill of each of its reporting units for impairment at least annually at the beginning of the fourth quarter and as “triggering” events occur that indicate that it is more likely than not that an impairment exists. The Company elected to bypass the optional qualitative goodwill assessment allowed by applicable accounting standards since 2012 and performed a quantitative impairment test for all reporting units as this was determined to be the most effective method to assess for impairment across a large spectrum of reporting units.
The Company estimates the fair value of its reporting units primarily using a market approach, based on current trading multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”) for companies operating in businesses similar to each of the Company's reporting units, in addition to recent available market sale transactions of comparable businesses. In certain circumstances the Company also estimates fair value utilizing a discounted cash flow analysis (i.e., an income approach) in order to validate the results of the market approach. If the estimated fair value of the reporting unit is less than its carrying value, the Company must perform additional analysis to determine if the reporting unit's goodwill has been impaired.
As of December 31, 2013, the Company had twenty-two reporting units for goodwill impairment testing. The carrying value of the goodwill included in each individual reporting unit ranges from $7 million to approximately $4.4 billion. No "triggering" events have occurred subsequent to the performance of the annual impairment test and no goodwill impairment charges were recorded for the years ended December 31, 2013, 2012 and 2011. The factors used by management in its impairment analysis are inherently subject to uncertainty. If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may be overstated and a charge would need to be taken against net earnings.
The following table shows the rollforward of goodwill reflected in the financial statements resulting from the Company’s activities during 2013 and 2012 ($ in millions).
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Test & Measurement | | Environmental | | Life Sciences & Diagnostics | | Dental | | Industrial Technologies | | Total |
Balance, January 1, 2012 | $ | 3,038.0 |
| | $ | 1,449.2 |
| | $ | 5,842.0 |
| | $ | 2,122.1 |
| | $ | 2,023.0 |
| | $ | 14,474.3 |
|
Attributable to 2012 acquisitions | 187.9 |
| | 104.6 |
| | 356.2 |
| | 32.6 |
| | 334.4 |
| | 1,015.7 |
|
Foreign currency translation & other | (3.8 | ) | | 1.1 |
| | (59.3 | ) | | 13.3 |
| | 20.7 |
| | (28.0 | ) |
Balance, December 31, 2012 | 3,222.1 |
| | 1,554.9 |
| | 6,138.9 |
| | 2,168.0 |
| | 2,378.1 |
| | 15,462.0 |
|
Attributable to 2013 acquisitions | 67.2 |
| | 214.1 |
| | 256.4 |
| | — |
| | 47.0 |
| | 584.7 |
|
Foreign currency translation & other | (22.4 | ) | | 82.4 |
| | (90.5 | ) | | 28.6 |
| | (6.6 | ) | | (8.5 | ) |
Balance, December 31, 2013 | $ | 3,266.9 |
| | $ | 1,851.4 |
| | $ | 6,304.8 |
| | $ | 2,196.6 |
| | $ | 2,418.5 |
| | $ | 16,038.2 |
|
Finite-lived intangible assets are amortized over their legal or estimated useful life. The following summarizes the gross carrying value and accumulated amortization for each major category of intangible asset ($ in millions):
|
| | | | | | | | | | | | | | | |
| December 31, 2013 | | December 31, 2012 |
| Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization |
Finite-lived intangibles: | | | | | | | |
Patents and technology | $ | 1,376.5 |
| | $ | (606.4 | ) | | $ | 1,289.2 |
| | $ | (499.5 | ) |
Customer relationships and other intangibles | 3,640.0 |
| | (1,123.9 | ) | | 3,528.1 |
| | (863.8 | ) |
Total finite-lived intangibles | 5,016.5 |
| | (1,730.3 | ) | | 4,817.3 |
| | (1,363.3 | ) |
Indefinite-lived intangibles: | | | | | | | |
Trademarks and trade names | 2,961.5 |
| | — |
| | 2,890.0 |
| | — |
|
Total intangibles | $ | 7,978.0 |
| | $ | (1,730.3 | ) | | $ | 7,707.3 |
| | $ | (1,363.3 | ) |
During 2013, the Company acquired finite-lived intangible assets, consisting primarily of customer relationships, with a weighted average life of 14 years. Refer to Note 2 for additional information on the intangible assets acquired.
Total intangible amortization expense in 2013, 2012 and 2011 was $365 million, $342 million and $284 million, respectively. Based on the intangible assets recorded as of December 31, 2013, amortization expense is estimated to be $376 million during 2014, $339 million during 2015, $305 million during 2016, $274 million during 2017 and $247 million during 2018.
