5. Goodwill and Purchased Intangible Assets
Goodwill
The following table presents the changes in goodwill by business segment during the year ended December 31, 2013:
|
Market Services |
Listing Services |
Information Services |
Technology Solutions |
Total |
|||||||||||
|
(in millions) |
|||||||||||||||
|
Balance at December 31, 2012 |
$ |
2,955 |
$ |
136 |
$ |
1,964 |
$ |
280 |
$ |
5,335 | |||||
|
Goodwill acquired |
470 |
- |
49 | 312 | 831 | ||||||||||
|
Foreign currency translation adjustment |
8 |
- |
6 | 6 | 20 | ||||||||||
|
Balance at December 31, 2013 |
$ |
3,433 |
$ |
136 |
$ |
2,019 |
$ |
598 |
$ |
6,186 | |||||
As of December 31, 2013, the amount of goodwill that is expected to be deductible for tax purposes in future periods is $878 million, of which $501 million is related to our acquisition of eSpeed and $299 million is related to our acquisition of the TR Corporate Solutions businesses.
The goodwill acquired for Market Services and Information Services shown above relates to our acquisition of eSpeed in June 2013. The goodwill acquired for Technology Solutions shown above relates to our acquisition of the TR Corporate Solutions businesses. See “2013 Acquisitions,” of Note 4, “Acquisitions and Divestiture,” for further discussion.
Purchased Intangible Assets
The following table presents details of our total purchased intangible assets, both finite- and indefinite-lived:
|
December 31, 2013 |
December 31, 2012 |
|||||||||||||||||||||||
|
Gross Amount |
Accumulated Amortization |
Net Amount |
Weighted-Average Useful Life (in Years) |
Gross Amount |
Accumulated Amortization |
Net Amount |
Weighted-Average Useful Life (in Years) |
|||||||||||||||||
|
(in millions) |
(in millions) |
|||||||||||||||||||||||
|
Finite-Lived Intangible Assets |
||||||||||||||||||||||||
|
Technology |
$ |
39 |
$ |
(12) |
$ |
27 | 5 |
$ |
26 |
$ |
(10) |
$ |
16 | 5 | ||||||||||
|
Customer relationships |
1,075 | (292) | 783 | 19 | 871 | (238) | 633 | 21 | ||||||||||||||||
|
Other |
5 | (3) | 2 | 8 | 6 | (2) | 4 | 8 | ||||||||||||||||
|
Foreign currency translation adjustment |
3 |
- |
3 | 6 | (1) | 5 | ||||||||||||||||||
|
Total finite-lived intangible assets |
$ |
1,122 |
$ |
(307) |
$ |
815 |
$ |
909 |
$ |
(251) |
$ |
658 | ||||||||||||
|
Indefinite-Lived Intangible Assets |
||||||||||||||||||||||||
|
Exchange and clearing registrations |
$ |
790 |
$ |
- |
$ |
790 |
$ |
790 |
$ |
- |
$ |
790 | ||||||||||||
|
Trade names |
756 |
- |
756 | 185 |
- |
185 | ||||||||||||||||||
|
Licenses |
51 |
- |
51 | 51 |
- |
51 | ||||||||||||||||||
|
Foreign currency translation adjustment |
(26) |
- |
(26) | (34) |
- |
(34) | ||||||||||||||||||
|
Total indefinite-lived intangible assets |
$ |
1,571 |
$ |
- |
$ |
1,571 |
$ |
992 |
$ |
- |
$ |
992 | ||||||||||||
|
Total intangible assets |
$ |
2,693 |
$ |
(307) |
$ |
2,386 |
$ |
1,901 |
$ |
(251) |
$ |
1,650 | ||||||||||||
Amortization expense for purchased finite-lived intangible assets was $63 million for the year ended December 31, 2013, $52 million for the year ended December 31, 2012 and $55 million for the year ended December 31, 2011. The increase in amortization expense in 2013 compared to 2012 was primarily due to amortization expense on identifiable finite-lived intangible assets purchased in connection with the acquisitions of eSpeed and the TR Corporate Solutions businesses offset by lower amortization expense on certain intangible assets that were impaired in the first quarter of 2013 as discussed below. The decrease in amortization expense in 2012 compared to 2011 was primarily due to lower amortization expense on certain intangible assets that were impaired in the second quarter of 2012 as discussed below, partially offset by amortization expense on identifiable finite-lived intangible assets purchased in connection with the acquisition of BWise in May 2012.
The estimated future amortization expense (excluding the impact of foreign currency translation adjustments of $3 million as of December 31, 2013) of purchased finite-lived intangible assets as of December 31, 2013 is as follows:
|
(in millions) |
|||
|
2014 |
$ |
71 | |
|
2015 |
69 | ||
|
2016 |
67 | ||
|
2017 |
65 | ||
|
2018 |
61 | ||
|
2019 and thereafter |
479 | ||
|
Total |
$ |
812 | |
Intangible Asset Impairment Charges
During 2013, we recorded non-cash intangible asset impairment charges totaling $14 million related to certain acquired intangible assets associated with customer relationships ($7 million) and a certain trade name ($7 million). These impairments resulted primarily from changes in the forecasted revenues associated with the acquired customer list of FTEN. The fair value of customer relationships was determined using the income approach, specifically the multi-period excess earnings method. The fair value of the trade name was determined using the income approach, specifically the RFRM. These charges are recorded in asset impairment charges in the Consolidated Statements of Income for 2013. These impairment charges related to our Market Services segment. However, for segment reporting purposes, these charges were allocated to corporate items based on the decision that these charges should not be used to evaluate the segment’s operating performance.
In the second quarter of 2012, we recorded non-cash intangible asset impairment charges totaling $28 million related to certain acquired finite-lived intangible assets associated with technology ($19 million), customer relationships ($6 million), and certain trade names ($3 million). These impairments resulted primarily from the replacement of certain acquired technology, as well as changes in the forecasted revenues associated with the acquired customer list of certain businesses. The fair value of technology and trademarks was determined using the income approach, specifically the RFRM. The fair value of customer relationships was determined using the income approach, specifically the multi-period excess earnings method. These charges were recorded in asset impairment charges in the Consolidated Statements of Income for 2012. Of the total impairment charge recorded during the second quarter of 2012, $17 million related to our Market Services segment and $11 million related to our Technology Solutions segment. However, for segment reporting purposes, these charges were allocated to corporate items based on the decision that these charges should not be used to evaluate the segments’ operating performance.