HP 2014 Annual Report Download - page 146

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 9: Acquisitions, Goodwill and Intangible Assets (Continued)
Intangible Assets
HP’s intangible assets are composed of:
As of October 31, 2014 As of October 31, 2013
Accumulated Accumulated
Accumulated Impairment Accumulated Impairment
Gross Amortization Loss Net Gross Amortization Loss Net
In millions
Customer contracts,
customer lists and
distribution
agreements ........ $ 5,289 $(3,228) $ (856) $1,205 $ 5,321 $(2,709) $ (856) $1,756
Developed and core
technology and
patents........... 4,266 (1,301) (2,138) 827 5,331 (1,966) (2,138) 1,227
Trade name and trade
marks ............ 1,693 (261) (1,336) 96 1,730 (211) (1,336) 183
In-process research and
development ....... — — — — 3 — — 3
Total intangible assets . . $11,248 $(4,790) $(4,330) $2,128 $12,385 $(4,886) $(4,330) $3,169
For fiscal 2014, $855 million of intangible assets became fully amortized and have been eliminated
from gross intangible assets and accumulated amortization. HP also eliminated gross intangible assets
and accumulated amortization related to the sale of a portfolio of intellectual property (‘‘IP’’) in the
first quarter of fiscal 2014.
For fiscal 2013, the majority of the decrease in gross intangible assets was related to $1.7 billion of
fully amortized intangible assets that were 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 PCs, 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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