17. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The changes in Goodwill during 2013 and 2012 were as follows:
|
In millions of dollars |
|
|
| |
|
Balance at December 31, 2011 |
|
$ |
25,413 |
|
|
Foreign exchange translation |
|
294 |
| |
|
Smaller acquisitions/divestitures, purchase accounting adjustments and other |
|
(21 |
) | |
|
Discontinued operations |
|
(13 |
) | |
|
Balance at December 31, 2012 |
|
$ |
25,673 |
|
|
Foreign exchange translation |
|
(577 |
) | |
|
Smaller acquisitions/divestitures, purchase accounting adjustments and other |
|
(25 |
) | |
|
Sale of Brazil Credicard |
|
(62 |
) | |
|
Balance at December 31, 2013 |
|
$ |
25,009 |
|
The changes in Goodwill by segment during 2013 and 2012 were as follows:
|
In millions of dollars |
|
Global Consumer |
|
Institutional Clients |
|
Citi Holdings |
|
Corporate/Other |
|
Total |
| |||||
|
Balance at December 31, 2011 |
|
$ |
10,236 |
|
$ |
10,737 |
|
$ |
4,440 |
|
$ |
— |
|
$ |
25,413 |
|
|
Goodwill acquired during 2012 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
Goodwill disposed of during 2012 |
|
— |
|
— |
|
(8 |
) |
— |
|
(8 |
) | |||||
|
Other (1) |
|
20 |
|
244 |
|
4 |
|
— |
|
268 |
| |||||
|
Intersegment transfers in/(out) (2) |
|
4,283 |
|
— |
|
(4,283 |
) |
— |
|
— |
| |||||
|
Balance at December 31, 2012 |
|
$ |
14,539 |
|
$ |
10,981 |
|
$ |
153 |
|
$ |
— |
|
$ |
25,673 |
|
|
Goodwill acquired during 2013 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
Goodwill disposed of during 2013 (3) |
|
(82 |
) |
— |
|
— |
|
— |
|
(82 |
) | |||||
|
Other (1) |
|
(472 |
) |
(113 |
) |
3 |
|
— |
|
(582 |
) | |||||
|
Balance at December 31, 2013 |
|
$ |
13,985 |
|
$ |
10,868 |
|
$ |
156 |
|
$ |
— |
|
$ |
25,009 |
|
(1) Other changes in Goodwill primarily reflect foreign exchange effects on non-dollar-denominated goodwill and purchase accounting adjustments.
(2) Primarily includes the transfer of the substantial majority of the Citi retail services business from Citi Holdings—Local Consumer Lending to Citicorp—North America Regional Consumer Banking during the first quarter of 2012.
(3) Primarily related to the Sale of Brazil Credicard. See Note 2 to the Consolidated Financial Statements.
Goodwill impairment testing is performed at the level below the business segments (referred to as a reporting unit). The Company performed its annual goodwill impairment test as of July 1, 2013 resulting in no impairment for any of the reporting units.
The reporting unit structure in 2013 was the same as the reporting unit structure in 2012, although certain names were changed and certain underlying businesses were transferred between certain reporting units in the third quarter of 2013. Specifically, assets were transferred from the legacy Brokerage Asset Management reporting unit to the Special Asset Pool, both components within the Citi Holdings segment. While goodwill affected by the reorganization was reassigned to reporting units that receive businesses using a relative fair value approach, no goodwill was allocated to this transferred portfolio as the assets do not represent a business as defined by GAAP and therefore goodwill allocation was not appropriate. The legacy reporting unit was renamed as Latin America Retirement Services, and continues to hold the $42 million of goodwill as of December 31, 2013. Additionally, the legacy Local Consumer Lending—Cards reporting unit was renamed Citi Holdings—Cards, but no changes were made to the businesses and assets assigned to the reporting unit. An interim goodwill impairment test was performed on the impacted reporting units as of July 1, 2013, resulting in no impairment.
No goodwill was deemed impaired in 2013, 2012 and 2011.
The following table shows reporting units with goodwill balances as of December 31, 2013.
|
In millions of dollars |
|
Fair Value as a % of |
|
Goodwill |
| |
|
North America Regional Consumer Banking |
|
183 |
% |
$ |
6,785 |
|
|
EMEA Regional Consumer Banking |
|
159 |
|
355 |
| |
|
Asia Regional Consumer Banking |
|
251 |
|
5,067 |
| |
|
Latin America Regional Consumer Banking |
|
244 |
|
1,778 |
| |
|
Securities and Banking |
|
147 |
|
9,270 |
| |
|
Transaction Services |
|
717 |
|
1,598 |
| |
|
Latin America Retirement Services(1) |
|
224 |
|
42 |
| |
|
Citi Holdings—Cards(2) |
|
170 |
|
114 |
| |
|
Citi Holdings—Other |
|
— |
|
— |
| |
(1) Latin America Retirement Services: fair value as a percentage of allocated book value reflects the reorganization under the new reporting unit structure as of July 1, 2013. This reporting unit was formerly known as Brokerage Asset Management.
(2) Citi Holdings—Cards: this reporting unit was formerly known as Local Consumer Lending—Cards.
Citigroup engaged an independent valuation specialist in 2013 and 2012 to assist in Citi’s valuation for most of the reporting units employing both the market approach and the discounted cash flow (DCF) method. Citi believes that the DCF method, using management projections for the selected reporting units and an appropriate risk-adjusted discount rate, is the most reflective of a market participant’s view of fair values given current market conditions. For the reporting units where both methods were utilized in 2013 and 2012, the resulting fair values were relatively consistent and appropriate weighting was given to outputs from both methods.
Intangible Assets
The components of intangible assets were as follows:
|
|
|
December 31, 2013 |
|
December 31, 2012 |
| ||||||||||||||
|
In millions of dollars |
|
Gross |
|
Accumulated |
|
Net |
|
Gross |
|
Accumulated |
|
Net |
| ||||||
|
Purchased credit card relationships |
|
$ |
7,552 |
|
$ |
6,006 |
|
$ |
1,546 |
|
$ |
7,632 |
|
$ |
5,726 |
|
$ |
1,906 |
|
|
Core deposit intangibles |
|
1,255 |
|
1,052 |
|
203 |
|
1,315 |
|
1,019 |
|
296 |
| ||||||
|
Other customer relationships |
|
675 |
|
389 |
|
286 |
|
767 |
|
380 |
|
387 |
| ||||||
|
Present value of future profits |
|
238 |
|
146 |
|
92 |
|
239 |
|
135 |
|
104 |
| ||||||
|
Indefinite-lived intangible assets |
|
323 |
|
— |
|
323 |
|
487 |
|
— |
|
487 |
| ||||||
|
Other(1) |
|
5,073 |
|
2,467 |
|
2,606 |
|
4,764 |
|
2,247 |
|
2,517 |
| ||||||
|
Intangible assets (excluding MSRs) |
|
$ |
15,116 |
|
$ |
10,060 |
|
$ |
5,056 |
|
$ |
15,204 |
|
$ |
9,507 |
|
$ |
5,697 |
|
|
Mortgage servicing rights (MSRs) |
|
2,718 |
|
— |
|
2,718 |
|
1,942 |
|
— |
|
1,942 |
| ||||||
|
Total intangible assets |
|
$ |
17,834 |
|
$ |
10,060 |
|
$ |
7,774 |
|
$ |
17,146 |
|
$ |
9,507 |
|
$ |
7,639 |
|
(1) Includes contract-related intangible assets.
Intangible assets amortization expense was $808 million, $856 million and $898 million for 2013, 2012 and 2011, respectively. Intangible assets amortization expense is estimated to be $743 million in 2014, $699 million in 2015, $792 million in 2016, $851 million in 2017 and $403 million in 2018.
The changes in intangible assets during 2013 were as follows:
|
In millions of dollars |
|
Net carrying |
|
Acquisitions/ |
|
Amortization |
|
Impairments |
|
FX and |
|
Net carrying |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Purchased credit card relationships |
|
$ |
1,906 |
|
$ |
22 |
|
$ |
(377 |
) |
$ |
(4 |
) |
$ |
(1 |
) |
$ |
1,546 |
|
|
Core deposit intangibles |
|
296 |
|
— |
|
(72 |
) |
(21 |
) |
— |
|
203 |
| ||||||
|
Other customer relationships |
|
387 |
|
|
|
(36 |
) |
— |
|
(65 |
) |
286 |
| ||||||
|
Present value of future profits |
|
104 |
|
— |
|
(12 |
) |
— |
|
— |
|
92 |
| ||||||
|
Indefinite-lived intangible assets |
|
487 |
|
(162 |
) |
— |
|
— |
|
(2 |
) |
323 |
| ||||||
|
Other |
|
2,517 |
|
431 |
|
(311 |
) |
— |
|
(31 |
) |
2,606 |
| ||||||
|
Intangible assets (excluding MSRs) |
|
$ |
5,697 |
|
$ |
291 |
|
$ |
(808 |
) |
$ |
(25 |
) |
$ |
(99 |
) |
$ |
5,056 |
|
|
Mortgage servicing rights (MSRs) (2) |
|
1,942 |
|
|
|
|
|
|
|
|
|
2,718 |
| ||||||
|
Total intangible assets |
|
$ |
7,639 |
|
|
|
|
|
|
|
|
|
$ |
7,774 |
| ||||
(1) Includes foreign exchange translation and purchase accounting adjustments.
(2) See Note 22 to the Consolidated Financial Statements for the roll-forward of MSRs.