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Note 4: Intangibles

At September 30, 2009 and December 31, 2008, the components of amortizable and unamortizable intangibles and certain other related information were as follows:

Developed technology consists primarily of current product offerings, primarily saline and silicone gel breast implants, obesity intervention products, dermal fillers, skin care and urologics products acquired in connection with business combinations and asset acquisitions. Customer relationship assets consist of the estimated value of relationships with customers acquired in connection with the Inamed acquisition, primarily in the breast implant market in the United States. Licensing assets consist primarily of capitalized payments to third party licensors related to the achievement of regulatory approvals to commercialize products in specified markets and up-front payments associated with royalty obligations for products that have achieved regulatory approval for marketing. Core technology consists of proprietary technology associated with silicone gel breast implants, gastric bands and intragastric balloon systems acquired in connection with the Inamed acquisition, dermal filler technology acquired in connection with the Cornéal acquisition, gastric band technology acquired in connection with the EndoArt acquisition, and a drug delivery technology acquired in connection with the Company’s 2003 acquisition of Oculex Pharmaceuticals, Inc. Other intangible assets consist of acquired product registration rights and distributor relationships.

The following table provides amortization expense by major categories of acquired amortizable intangible assets for the three and nine month periods ended September 30, 2009 and 2008, respectively:

Amortization expense related to acquired intangible assets generally benefits multiple business functions within the Company, such as the Company’s ability to sell, manufacture, research, market and distribute products, compounds and intellectual property. The amount of amortization expense excluded from cost of sales consists primarily of amounts amortized with respect to developed technology and licensing intangible assets.

Estimated amortization expense is $147.0 million for 2009, $143.4 million for 2010, $140.0 million for 2011, $134.5 million for 2012 and $121.3 million for 2013.

8. Intangible Assets

The carrying amounts of identifiable intangible assets are summarized as follows:

In April 2009, the Company acquired $2 of finite-life management contracts with a five-year estimated useful life associated with the acquisition of the R3 Capital Partners funds.

NOTE 2 – FRANCHISE LICENSE INTANGIBLE ASSETS

During the second quarter of 2008, we recorded a $5.3 billion ($3.4 billion net of tax, or $7.06 per common share) noncash impairment charge to reduce the carrying amount of our North American franchise license intangible assets to their estimated fair value at that time. The second quarter of 2008 decline in the estimated fair value of our North American franchise license intangible assets was primarily driven by the following factors, which resulted in a reduction in the forecasted cash flows and growth rates used to estimate fair value at that time:

For additional information about our franchise license intangible assets and goodwill, refer to Note 2 of the Notes to Consolidated Financial Statements in our Form 10-K.

Intangible assets consist of servicing rights, core deposit intangibles, customer lists, non-compete agreements and cardholder relationships. Intangible assets, excluding servicing rights, are amortized on either a straight-line or an accelerated basis over their estimated useful lives and have an estimated weighted-average life at September 30, 2009, December 31, 2008 and September 30, 2008 of 3.5 years, 2.8 years and 3.8 years, respectively. The Bancorp reviews intangible assets for possible impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. For more information on servicing rights, see Note 8. The details of the Bancorp’s intangible assets are shown in the following table.

As of September 30, 2009, all of the Bancorp’s intangible assets were being amortized. Amortization expense recognized on intangible assets, including servicing rights, for the three months ended September 30, 2009 and 2008 was $42 million and $39 million, respectively. For the nine months ended September 30, 2009 and 2008, amortization expense was $162 million and $127 million, respectively. The Bancorp estimates amortization expense, including servicing rights, to be approximately $62 million for the remaining three months of 2009, $209 million in 2010, $152 million in 2011, $116 million in 2012 and $90 million in 2013.

Note 10. Intangible Assets

Intangible assets are net of accumulated amortization of $49.9 million and $43.5 million at September 30, 2009 and December 31, 2008, respectively.

Note 8 – Intangible Assets

The following table sets forth the gross amount and accumulated amortization of the Company’s intangible assets:

Intangible asset amortization expense was $40.1 million and $128.9 million for the three months ended September 30, 2009 and 2008, respectively. For the nine months ended September 30, 2009 and 2008, intangible asset amortization was $117.1 million and $178.0 million, respectively.

NOTE 10    INTANGIBLE ASSETS

The components of intangible assets, all of which are finite-lived, were as follows:

We generally amortize acquired intangibles on a straight-line basis over their estimated weighted average lives. Intangible assets amortization expense was $149 million for the three months ended September 30, 2009 as compared with $140 million for the three months ended September 30, 2008. The following table outlines the estimated future amortization expense related to intangible assets held at September 30, 2009:

9. Intangible Assets

Intangible assets principally comprise software, technology and customer relationships. The gross book value and accumulated amortization of intangible assets were as follows:

Amortization expense charged to income was as follows:

The weighted average amortization period for all intangible assets is approximately 12 years.

Based on the net book value of intangible assets at September 30, 2009, amortization charged to income for the subsequent five years is estimated to be: remainder of 2009 – $27 million; 2010 – $104 million; 2011– $96 million; 2012 – $83 million; 2013 – $73 million and 2014 – $67 million.

14.        Other intangible assets, net

Intellectual property rights relate to currently marketed products and IPR&D for those acquired products which have not yet obtained regulatory approval. At September 30, 2009 the net book value of these intellectual property rights allocated to the Specialty Pharmaceuticals operating segment was $1,267.2 million (December 31, 2008: $1,244.9 million) and in the Human Genetic Therapies operating segment was $564.9 million (December 31, 2008: $579.3 million).

The increase in the net book value of other intangible assets for the nine months to September 30, 2009 is shown in the table below:

During the nine months to September 30, 2009 the Company acquired intangible assets totaling $80.2 million, principally relating to $78.5 million for EQUASYM IR and XL for the treatment of ADHD ($73.0 million for currently marketed products and $5.5 million for IPR&D). The weighted average amortization period for acquired currently marketed products is 13 years.

The FASB issued new guidance applicable for business combinations completed from January 1, 2009 relating to IPR&D acquired in a business combination. Following the issuance of this guidance, IPR&D is now capitalized and considered to be an indefinite lived intangible asset until the completion or abandonment of the associated research and development (“R&D”) efforts. Once the R&D efforts are completed the useful life of the relevant assets will be determined. Management estimates that the annual amortization charge in respect of intangible assets held at September 30, 2009 will be approximately $125 million for each of the five years to September 30, 2014. Estimated amortization expense can be affected by various factors including future acquisitions, disposals of product rights, regulatory approval and subsequent amortization of the acquired IPR&D projects, foreign exchange movements and the technological advancement and regulatory approval of competitor products.

Note 6. Intangible Assets

Indefinite-Lived Intangible Assets

We hold FCC licenses authorizing the use of radio frequency spectrum to deploy our wireless services: 1.9 GHz licenses utilized in the CDMA network, and 800 megahertz (MHz) and 900 MHz licenses utilized in the iDEN network. We also hold 1.9 GHz and other FCC licenses that are not currently being utilized. As long as the Company acts within the requirements and constraints of the regulatory authorities, the renewal and extension of these licenses is reasonably certain at minimal cost. We are not aware of any technology being developed that would render this spectrum obsolete and have concluded that these licenses are indefinite-lived intangible assets.

Sprint assesses annually, or more frequently if necessary, our ability to recover the carrying value of our spectrum licenses, which are carried as a single unit of accounting. In assessing recoverability, we estimate the fair value of spectrum using the Greenfield direct value method, which approximates value through estimating the discounted future cash flows of a hypothetical start-up business. Assumptions key in estimating fair value under this method include, but are not limited to, capital expenditures, customer activations and deactivations, market share achieved, tax rates in effect and discount rate. A one percent decline in our assumed revenue growth rate used to estimate a terminal value, a one percent decline in our assumed net cash flows or a one percent adverse change in any of the key assumptions referred to above would not result in an impairment of our FCC licenses as of the most recent testing date in the fourth quarter 2008. A decline in the estimated fair value of the spectrum of up to 35% also would not result in an impairment of the carrying value of our FCC licenses.

Intangible Assets Subject to Amortization

NOTE 5—INTANGIBLES

At September 30, 2009, net intangible assets consisted of above market resident leases ($1.5 million), in-place resident leases ($4.9 million) and other intangibles ($2.3 million). At December 31, 2008, net intangible assets consisted of above market resident leases ($1.6 million), in-place resident leases ($5.3 million) and other intangibles ($2.1 million). The weighted average amortization period of intangible assets at September 30, 2009 was approximately three years.

At September 30, 2009 and December 31, 2008, net intangible liabilities, comprised of below market resident leases, were $1.9 million and $2.3 million, respectively. The weighted average amortization period of intangible liabilities at September 30, 2009 was approximately three years.