HP 2013 Annual Report Download - page 116

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 6: Goodwill and Intangible Assets (Continued)
Intangible Assets
HP’s intangible assets associated with completed acquisitions for each of the following fiscal years
ended October 31 are composed of:
October 31, 2013 October 31, 2012
Accumulated Accumulated
Accumulated Impairment Accumulated Impairment
Gross Amortization Loss Net Gross Amortization Loss Net
In millions
Customer contracts,
customer lists and
distribution
agreements ....... $ 5,321 $(2,709) $ (856) $1,756 $ 5,807 $(2,625) $ (856) $2,326
Developed and core
technology and
patents .......... 5,331 (1,966) (2,138) 1,227 6,580 (2,501) (2,138) 1,941
Trade name and trade
marks ........... 1,730 (211) (1,336) 183 1,732 (155) (1,336) 241
In-process research and
development ...... 3 — — 3 7 — — 7
Total intangible assets . $12,385 $(4,886) $(4,330) $3,169 $14,126 $(5,281) $(4,330) $4,515
For fiscal 2013, the majority of the decrease in gross intangibles was related to $1.7 billion of fully
amortized intangible assets that have been eliminated from both the gross and accumulated amounts.
In fiscal 2012, HP recorded total intangible asset impairment charges of $4.3 billion, of which
$3.1 billion was related to the Autonomy reporting unit as described above. The remaining $1.2 billion
was related to a change in the Compaq branding strategy. In May 2012, HP approved a change to its
branding strategy for personal computers, which has resulted in a more limited and focused use of the
‘‘Compaq’’ trade name acquired in fiscal 2002. In conjunction with the change in branding strategy, HP
revised its assumption as to the useful life of that intangible asset, which resulted in a reclassification of
the asset from an indefinite-lived intangible to a finite-lived intangible. These changes triggered an
impairment review of the ‘‘Compaq’’ trade name intangible asset. In conducting an impairment review
of an intangible asset, HP compares the fair value of the asset to its carrying amount. If the fair value
of the asset is less than the carrying amount, the difference is recorded as an impairment loss. HP
estimated the fair value of the ‘‘Compaq’’ trade name by calculating the present value of the royalties
saved that would have been paid to a third party had HP not owned the trade name. Following the
completion of that analysis, HP determined that the fair value of the trade name asset was less than
the carrying amount due primarily to the change in the useful life assumption and a decrease in
expected future revenues related to Compaq-branded products resulting from the more focused
branding strategy. As a result, HP recorded an impairment charge of $1.2 billion in the third quarter of
fiscal 2012, which was included in the Impairment of goodwill and intangible assets line item in the
Consolidated Statements of Earnings.
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