IBM 2004 Annual Report Download - page 65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
63
International Business Machines Corporation and Subsidiary Companies
ibm annual report 2004
i. Intangible Assets Including Goodwill
The following schedule details the company’s intangible asset balances by major asset class:
(Dollars in millions)
At December 31, 2004
Gross Net
Carrying Accumulated Carrying
Intangible Asset Class Amount Amortization Amount
Capitalized software $«1,565 $««««(680) $««««885
Client-related 861 (335) 526
Completed technology 364 (206) 158
Strategic alliances 104 (47) 57
Patents/trademarks 33 (11) 22
Other** 247 (106) 141
Total $«3,174 $«(1,385) $«1,789
(Dollars in millions)
At December 31, 2003
Gross Net
Carrying Accumulated Carrying
Intangible Asset Class Amount Amortization Amount
Capitalized software*$«1,616 $««««(802) $««««814
Client-related 704 (254) 450
Completed technology 448 (228) 220
Strategic alliances 118 (38) 80
Patents/trademarks 98 (66) 32
Other** 165 (37) 128
Total $«3,149 $«(1,425) $«1,724
*Reclassified to conform with 2004 presentation. In prior years, capitalized software was recorded in Investments and
sundry assets.
**Other intangibles are primarily acquired proprietary and nonproprietary business processes, methodologies and systems,
and impacts from currency translation.
The company amortizes the cost of intangible assets over their estimated useful lives
unless such lives are deemed indefinite. Amortizable intangible assets are tested for
impairment based on undiscounted cash flows and, if impaired, written down to fair value
based on either discounted cash flows or appraised values. Intangible assets with indefinite
lives are tested annually for impairment and written down to fair value as required. No
impairment of intangible assets has been identified during any of the periods presented.
The net carrying amount of intangible assets increased by $65 million for the year
ended December 31, 2004, primarily due to increased investments in Software.
Total amortization was $956 million, $955 million and $802 million for the years ended
December 31, 2004, 2003 and 2002, respectively. The aggregate amortization expense for
acquired intangibles (excluding capitalized software) was $370 million, $349 million and
$181 million for the years ended December 31, 2004, 2003 and 2002, respectively.
The future amortization expense for each of the five succeeding years relating to all
intangible assets that are currently recorded in the Consolidated Statement of Financial
Position is estimated to be the following at December 31, 2004:
(Dollars in millions)
2005 $«875
2006 494
2007 200
2008 93
2009 72
goodwill
The changes in the carrying amount of goodwill, by reporting segment, for the year ended
December 31, 2004, are as follows:
(Dollars in millions)
Foreign
Currency
Balance Purchase Translation Balance
Jan. 1, Goodwill Price and Other Dec. 31,
Segment 2004 Additions Adjustments Divestitures Adjustments 2004
Global Services $«4,184 $««««808 $«««(41) $«(2) $«222 $«5,171
Systems and
Technology Group 161 — — — 8 169
Personal Systems Group 71 — — — 5 76
Software 2,505 585 (75) — 6 3,021
Global Financing —— ————
Enterprise Investments —— ————
Total $«6,921 $«1,393 $«(116) $«(2) $«241 $«8,437
Goodwill is tested annually for impairment using a fair value approach, at the “reporting
unit” level. A reporting unit is the operating segment, or a business which is one level
below that operating segment (the “component” level) if discrete financial information is
prepared and regularly reviewed by management at the component level. No impairment
of goodwill has been identified during any of the periods presented.