Goodwill and Other Intangibles
The Company is required to assess goodwill and any indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. The Company performs the annual impairment test for each of its reporting units during the third quarter of each year. In 2013, the Company elected to not use the option to perform a qualitative assessment to determine if a step 1 impairment test was necessary and instead elected to perform a step 1 impairment test. Fair values of the reporting units were estimated using either a market approach or discounted cash flow model. This fair value determination was categorized as Level 3 in the fair value hierarchy. Carrying values for the reporting units are based on balances at the prior quarter end and include directly identified assets and liabilities as well as an allocation of those assets and liabilities not recorded at the reporting unit level. The Company completed its 2013 annual review in the third quarter and concluded goodwill was not impaired, as the fair value of each reporting unit exceeded its carrying value by a substantial margin.
Other intangible assets that are not deemed to have an indefinite life are amortized over their estimated lives and reviewed for impairment upon the occurrence of certain triggering events in accordance with applicable accounting literature.
Changes in the carrying amount of goodwill are as follows:
|
| | | | | | | |
(In millions of dollars) | 2013 |
| | 2012 |
|
Balance as of January 1, as reported | $ | 6,792 |
| | $ | 6,562 |
|
Goodwill acquired | 113 |
| | 226 |
|
Other adjustments(a) | (12 | ) | | 4 |
|
Balance at December 31, | $ | 6,893 |
| | $ | 6,792 |
|
| |
(a) | Reflects increases due to the impact of foreign exchange in both years. 2013 also reflects a reduction due to purchase accounting adjustments. |
The goodwill acquired of $113 million in 2013 (approximately $7 million of which is deductible for tax purposes) comprised of $96 million related to the Risk and Insurance Services segment and $17 million related to the Consulting segment.
Goodwill allocable to the Company’s reportable segments is as follows: Risk and Insurance Services, $4.7 billion and Consulting, $2.2 billion.
Amortized intangible assets consist primarily of the cost of client lists and trade names acquired. The gross cost and accumulated amortization at December 31, 2013 and 2012 is as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | |
(In millions of dollars) | 2013 | | 2012 |
| Gross Cost |
| | Accumulated Amortization |
| | Net Carrying Amount |
| | Gross Cost |
| | Accumulated Amortization |
| | Net Carrying Amount |
|
Amortized intangibles | $ | 888 |
| | $ | 416 |
| | $ | 472 |
| | $ | 814 |
| | $ | 345 |
| | $ | 469 |
|
The Company recorded an intangible asset impairment charge of $5 million and $8 million in the third quarter of 2013 and 2012, respectively, in the Risk & Insurance Services segment.
Aggregate amortization expense for each of the years ended December 31, 2013, 2012 and 2011 was $72 million, $72 million and $65 million, respectively. The estimated future aggregate amortization expense is as follows: |
| | | |
For the Years Ending December 31, | |
(In millions of dollars) | |
2014 | $ | 77 |
|
2015 | 75 |
|
2016 | 68 |
|
2017 | 61 |
|
2018 | 58 |
|
Subsequent years | 133 |
|
| $ | 472 |
|
