I. Intangible assets including goodwill
Intangible assets
The following table details the company’s intangible asset balances by major asset class:
| ($ in millions) | |||
| At December 31, 2007 | |||
|---|---|---|---|
| Intangible Asset Class | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount |
|
* Other intangibles are primarily acquired proprietary and nonproprietary business processes, methodologies and systems, and impacts from currency translation. |
|||
| Capitalized software | $ 1,926 | $ (826) | $ 1,100 |
| Client-related | 1,054 | (495) | 559 |
| Completed technology | 536 | (194) | 342 |
| Strategic alliances | 103 | (103) | — |
| Patents/trademarks | 128 | (61) | 67 |
| Other* | 154 | (115) | 39 |
| Total | $ 3,901 | $ (1,794) | $ 2,107 |
| ($ in millions) | |||
| At December 31, 2006 | |||
|---|---|---|---|
| Intangible Asset Class | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount |
|
* Other intangibles are primarily acquired proprietary and nonproprietary business processes, methodologies and systems, and impacts from currency translation. |
|||
| Capitalized software | $ 1,871 | $ (837) | $ 1,034 |
| Client-related | 1,038 | (424) | 614 |
| Completed technology | 500 | (128) | 372 |
| Strategic alliances | 104 | (89) | 15 |
| Patents/trademarks | 112 | (29) | 83 |
| Other* | 264 | (179) | 84 |
| Total | $ 3,888 | $ (1,686) | $ 2,202 |
The company amortizes 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 recorded during any of the periods presented.
The net carrying amount of intangible assets decreased by $95 million for the year ended December 31, 2007, primarily due to the amortization of acquired intangibles, partially offset by net increases in capitalized software.
Total amortization was $1,163 million and $1,076 million for the years ended December 31, 2007 and 2006, respectively. The aggregate amortization expense for acquired intangibles (excluding capitalized software) was $367 million and $316 million for the years ended December 31, 2007 and 2006, respectively. In addition, in 2007 the company retired $1,066 million of fully amortized intangible assets, impacting both the gross carrying amount and accumulated amortization for this amount.
The future amortization expense for each of the five succeeding years related to all intangible assets that are currently recorded in the Consolidated Statement of Financial Position is estimated to be as follows at December 31, 2007:
| ($ in millions) | |||
| Capitalized Software | Acquired Intangibles | Total | |
|---|---|---|---|
| 2008 | $ 670 | $ 324 | $ 995 |
| 2009 | 338 | 266 | 604 |
| 2010 | 92 | 174 | 266 |
| 2011 | — | 124 | 124 |
| 2012 | — | 57 | 57 |
Goodwill
The changes in the carrying amount of goodwill, by reportable segment, for the year ended December 31, 2007, are presented in the table below. There was no impairment of goodwill recorded in 2007:
| ($ in millions) | ||||||
| Segment | Balance January 1, 2007 | Goodwill Additions | Purchase Price Adjustments | Divestitures | Foreign Currency Translation Adjustments | Balance December 31, 2007 |
|---|---|---|---|---|---|---|
| Global Business Services | $ 3,811 | $ 14 | $ (5) | $ — | $ 221 | $ 4,041 |
| Global Technology Services | 2,700 | 77 | 27 | — | 110 | 2,914 |
| Systems and Technology | 214 | 269 | — | — | 1 | 484 |
| Software | 6,129 | 639 | 54 | — | 24 | 6,846 |
| Total | $ 12,854 | $ 999 | $ 76 | $ — | $ 356 | $ 14,285 |
