Proctor and Gamble 2014 Annual Report Download - page 57

The Procter & Gamble Company 55
Amounts in millions of dollars except per share amounts or as otherwise specified.
On July 31, 2014, the Company completed the divestiture of
its Pet Care operations in North America, Latin America and
other selected countries. The Company is pursuing alternate
plans to sell its Pet Care business in the other markets,
primarily the European Union countries. As a result, the Pet
Care goodwill is included in the Corporate Segment as of
June 30, 2013 and 2012. Pet Care goodwill and intangible
assets at June 30, 2014 are reported in assets held for sale.
The remaining change in goodwill since June 30, 2013 was
primarily due to currency translation across all reportable
segments.
The results of our goodwill impairment testing during fiscal
2013 determined that the estimated fair value of our
Appliances reporting unit declined below its carrying
amount. As a result, we recorded a non-cash before and
after-tax impairment charge of $259, in fiscal 2013, to
reduce the carrying amount of goodwill to estimated fair
value. We also recorded a non-cash before-tax impairment
charge of $49 ($31 after-tax) to reduce the carrying amount
of our Braun indefinite-lived trade name intangible asset to
its fair value. The fiscal 2013 declines in fair values of the
Appliances reporting unit and the Braun trade name
intangible asset were primarily driven by currency impacts.
Specifically, currency in Japan, a country that generates a
significant portion of the Appliances earnings, devalued
approximately 20% in the second half of fiscal 2013 relative
to the currencies in which the underlying net assets are
recorded. This sustained reduction in the yen reduced the
underlying category market size and the projected future
cash flows of the business, which in turn triggered the
impairment.
In October 2012, the Company acquired our partner's
interest in a joint venture in Iberia that operates in our Baby
Care and Family Care and Health Care reportable segments.
We paid $1.1 billion for our partner's interest and the
transaction was accounted for as a business combination.
The total enterprise value of $1.9 billion was allocated to
indefinite-lived intangible assets of $0.2 billion, defined-life
intangible assets of $0.9 billion and goodwill of $1.1 billion.
These were partially offset by $0.3 billion of deferred tax
liabilities on the intangible assets. The Company recognized
a $0.6 billion holding gain on its previously held investment,
which was included in other non-operating income, net in
the Consolidated Statement of Earnings in fiscal 2013. In
addition to these items and the impairment discussed above,
the remaining net increase in goodwill during fiscal 2013
was primarily due to currency translation across all
reportable segments.
The results of our goodwill impairment testing during fiscal
2012 determined that the estimated fair values of our
Appliances and Salon Professional reporting units were less
than their respective carrying amounts. As a result, we
recorded a non-cash before and after-tax impairment charge
of $1.3 billion in fiscal 2012 to reduce the carrying amount
of goodwill to estimated fair value. $899 of the impairment
related to Appliances and $431 related to Salon Professional.
Our impairment testing for indefinite-lived intangible assets
during fiscal 2012 also indicated a decline in the fair value
of our Koleston Perfect and Wella trade name intangible
assets below their respective carrying values. This resulted
in a non-cash before-tax impairment charge of $246 ($173
after-tax) to reduce the carrying amounts of these assets to
their respective values. The fiscal 2012 declines in the fair
values of the Appliances and Salon Professional reporting
units and the underlying Koleston Perfect and Wella trade
name intangible assets were driven by a combination of
competitive and economic factors, which resulted in a
reduction in the forecasted growth rates and cash flows used
to estimate fair value.
All of the goodwill and indefinite-lived intangible asset
impairment charges are included in Corporate for segment
reporting.
The goodwill and intangible asset valuations are dependent
on a number of significant estimates and assumptions,
including macroeconomic conditions, overall category
growth rates, competitive activities, cost containment and
margin expansion and Company business plans. We believe
these estimates and assumptions are reasonable. However,
actual events and results could differ substantially from
those used in our valuations. To the extent such factors
result in a failure to achieve the level of projected cash flows
used to estimate fair value, we may need to record additional
non-cash impairment charges in the future.
Identifiable intangible assets were comprised of:
2014 2013
June 30
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
INTANGIBLE ASSETS WITH DETERMINABLE
LIVES
Brands $ 4,154 $ (2,205) $ 4,251 $ (2,020)
Patents and
technology 2,850 (2,082) 2,976 (2,032)
Customer
relationships 2,002 (763) 2,118 (703)
Other 355 (164) 348 (168)
TOTAL 9,361 (5,214) 9,693 (4,923)
INTANGIBLE ASSETS WITH INDEFINITE LIVES
Brands 26,696 — 26,802 —
TOTAL 36,057 (5,214) 36,495 (4,923)
Due to the divestiture of the Pet Care business, intangible
assets specific to the Pet Care business are reported in assets
held for sale in accordance with the accounting principles for
assets held for sale as of June 30, 2014.
Amortization expense of intangible assets was as follows:
Years ended June 30 2014 2013 2012
Intangible asset amortization $ 514 $ 528 $ 500