Annual report pursuant to Section 13 and 15(d)

Goodwill and Acquired Intangible Assets

v3.6.0.2
Goodwill and Acquired Intangible Assets
12 Months Ended
Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Acquired Intangible Assets
Goodwill and Acquired Intangible Assets
Goodwill
The carrying amounts of goodwill as of December 31, 2016 and December 26, 2015 were as follows:
 
Computing and Graphics
 
Enterprise, Embedded and Semi-Custom
 
All Other
 
Total
 
(In millions)
Initial goodwill due to ATI acquisition
$
1,194

 
$
255

 
$
745

 
$
2,194

Initial goodwill due to SeaMicro acquisition
165

 
65

 

 
230

 
1,359

 
320

 
745

 
2,424

Accumulated impairment losses
(1,359
)
 

 
(745
)
 
(2,104
)
Balance as of December 27, 2014

 
320

 

 
320

Assets held-for-sale (sold to ATMP JV during 2016)
 
 
(42
)
 
 
 
(42
)
Balance as of December 26, 2015

 
278

 

 
278

Adjustment to assets sold to ATMP JV

 
11

 

 
11

Balance as of December 31, 2016

 
289

 

 
289

Goodwill, gross
1,359

 
289

 
745

 
2,424

Accumulated impairment losses
$
(1,359
)
 
$

 
$
(745
)
 
$
(2,104
)

As a result of the decision to form the JVs with TFME, the balance sheet as of December 26, 2015 reflects held-for-sale accounting of the ATMP assets and liabilities which requires reclassification of such financial amounts to current assets and current liabilities. Asset balances reclassified into other current assets included goodwill of $42 million. During 2016, the formation of ATMP JV was completed and the actual goodwill assigned to ATMP JV was approximately $31 million.
During the fourth quarter of 2014, the Company conducted its annual impairment test of goodwill. In step one of the impairment test, the Company compared the fair value of each of the reporting units to its carrying value. The Company determined that the carrying value of the Computing and Graphics reporting unit exceeded its fair value, indicating potential goodwill impairment existed based on a combination of factors such as a decline in stock price. Therefore, the Company performed the second step of the impairment test, in which the fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit on a fair value basis, including any unrecognized intangible assets, with any excess representing the implied fair value of goodwill. The fair value was determined using an income approach, which estimates the present value of future cash flows based on management’s forecast of revenue growth rates and operating margins. Based on this analysis, the implied fair value of the goodwill of the Computing and Graphics reporting unit was zero. The Company concluded that the carrying amount of goodwill assigned to the Computing and Graphics segment exceeded the implied fair values and recorded an impairment charge of $233 million, which is included in “Goodwill impairment charge” on the Company’s consolidated statement of operations.
The Company determined that the estimated fair value exceeded the carrying value of the remaining two reporting units, indicating that there was no goodwill impairment with respect to these reporting units. In connection with completing the goodwill impairment analysis, the Company reviewed its long-lived tangible and intangible assets within the Computing and Graphics reporting unit under ASC 360, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company determined that the forecasted undiscounted cash flows related to these assets or asset groups were in excess of their carrying values, and therefore these assets were not impaired.
In the fourth quarters of 2016 and 2015, the Company conducted its annual impairment tests of goodwill. Based on the results of the Company’s analysis of goodwill, each reporting unit’s fair value exceeded its carrying value, indicating that there was no goodwill impairment in 2016 and 2015.
Acquisition-related intangible assets
As a part of the Company’s strategy to simplify and sharpen its investment focus, the Company decided to exit the dense server systems business, formerly SeaMicro, in the first quarter of 2015. As a result, the Company recorded a charge of $76 million in “Restructuring and other special charges, net” on the Company’s consolidated statements of operations during 2015. This charge consisted of an impairment charge of $62 million related to the acquired intangible assets. The Company concluded that the carrying value of the acquired intangible assets associated with its dense server systems business was fully impaired as the Company did not have plans to utilize the related freedom fabric technology in any of its future products nor did it have any plans at that time to monetize the associated intellectual property.
There were no unamortized balances of acquisition-related intangible assets as of December 31, 2016 and December 26, 2015.
The following table summarizes amortization expense associated with acquisition-related intangible assets:
 
 
2016
 
2015
 
2014
 
 
(In millions)
Developed technology
 
$

 
$
3

 
$
13

Customer relationships
 

 

 
1

Total
 
$

 
$
3

 
$
14