Goodwill and Net Intangible Assets

6 Months Ended

Jun. 30, 2012

8. Goodwill and Net Intangible Assets.

The Company tests goodwill for impairment on an annual basis and on an interim basis when certain events or circumstances exist. The Company tests for impairment at the reporting unit level, which is generally at the level of or one level below its business segments. For both the annual and interim tests, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing the two-step impairment test is not required. However, if the Company concludes otherwise, then it is required to perform the first step of the two-step impairment test. Goodwill impairment is determined by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not deemed to be impaired. If the estimated fair value is below carrying value, however, further analysis is required to determine the amount of the impairment. Additionally, if the carrying value of a reporting unit is zero or a negative value and it is determined that it is more likely than not the goodwill is impaired, further analysis is required. The estimated fair values of the reporting units are derived based on valuation techniques the Company believes market participants would use for each of the reporting units.

The estimated fair values of the reporting units are generally determined utilizing methodologies that incorporate price-to-book and price-to-earnings multiples of certain comparable companies. The Company also utilizes a discounted cash flow methodology for certain reporting units.

Due to the volatility in the equity markets, the economic outlook and the Company's common shares trading below book value during the quarters ended December 31, 2011 and June 30, 2012, the Company performed additional impairment testing, which did not result in any goodwill impairment. Adverse market or economic events could result in impairment charges in future periods. At June 30, 2012 and December 31, 2011, each of the Company's reporting units with goodwill had a fair value that was substantially in excess of its carrying value.

Goodwill.

Changes in the carrying amount of the Company's goodwill, net of accumulated impairment losses for the six months ended June 30, 2012, were as follows:

		Institutional Securities		Global Wealth Management Group		Asset Management		Total
		(dollars in millions)
Goodwill at December 31, 2011(1)	$	330	$	5,616	$	740	$	6,686
Foreign currency translation adjustments and other		(11)		─		─		(11)
Goodwill disposed of during the period(2)		─		(65)		─		(65)
Goodwill at June 30, 2012(1)	$	319	$	5,551	$	740	$	6,610

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The amount of the Company's goodwill before accumulated impairments of $700 million, which included $673 million related to the Institutional Securities business segment and $27 million related to the Asset Management business segment, was $7,310 million and $7,386 million at June 30, 2012 and December 31, 2011, respectively.
The Global Wealth Management Group activity represents goodwill disposed of in connection with the sale of Quilter (see Notes 1 and 20).

Net Intangible Assets.

Changes in the carrying amount of the Company's intangible assets for the six months ended June 30, 2012 were as follows:

		Institutional Securities		Global Wealth Management Group		Asset Management		Total

		(dollars in millions)
Amortizable net intangible assets at December 31, 2011	$	229	$	3,641	$	2	$	3,872
Mortgage servicing rights (see Note 6)		122		11		—		133
Indefinite-lived intangible assets		—		280		—		280
Net intangible assets at December 31, 2011	$	351	$	3,932	$	2	$	4,285
Amortizable net intangible assets at December 31, 2011	$	229	$	3,641	$	2	$	3,872
Foreign currency translation adjustments and other		(6)		1		—		(5)
Amortization expense		(8)		(160)		—		(168)
Impairment losses(1)		(4)		—		—		(4)
Intangible assets acquired during the period		4		—		—		4
Amortizable net intangible assets at June 30, 2012		215		3,482		2		3,699
Mortgage servicing rights (see Note 6)		—		8		—		8
Indefinite-lived intangible assets		—		280		—		280
Net intangible assets at June 30, 2012	$	215	$	3,770	$	2	$	3,987

_____________

Impairment losses are recorded within Other expenses.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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