| December 31 (In millions) | 2004 | 2003 | ||||
|---|---|---|---|---|---|---|
| GE | ||||||
| Goodwill | $ | 45,775 | $ | 26,242 | ||
| Capitalized software | 1,894 | 1,678 | ||||
| Other intangibles | 7,051 | 2,284 | ||||
| 54,720 | 30,204 | |||||
| GECS | ||||||
| Goodwill | 25,416 | 21,527 | ||||
| Present value of future profits (PVFP) | 1,426 | 1,562 | ||||
| Capitalized software | 758 | 800 | ||||
| Other intangibles | 920 | 932 | ||||
| 28,520 | 24,821 | |||||
| Total | $ | 83,240 | $ | 55,025 | ||
| GE intangible assets were net of accumulated amortization of $6,098 million in 2004 and $5,759 million in 2003. GECS intangible assets were net of accumulated amortization of $10,876 million in 2004 and $10,292 million in 2003. |
Changes in goodwill balances, net of accumulated amortization, follow.
| 2004 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In millions) | Balance January 1 |
Acquisitions/ purchase accounting adjustments |
Inter- segment transfers |
Currency exchange and other | Balance December 31 | ||||||||||
| Advanced Materials | $ | 2,810 | $ | (6 | ) | $ | — | $ | 46 | $ | 2,850 | ||||
| Commercial Finance | 8,736 | 938 | 523 | 74 | 10,271 | ||||||||||
| Consumer Finance | 7,779 | 1,275 | 384 | 422 | 9,860 | ||||||||||
| Consumer & Industrial | 795 | — | — | (16 | ) | 779 | |||||||||
| Energy | 4,212 | 200 | — | 144 | 4,556 | ||||||||||
| Equipment & Other Services | 920 | (11 | ) | (523 | ) | 1,073 | (a) | 1,459 | |||||||
| Healthcare | 4,766 | 8,422 | — | 71 | 13,259 | ||||||||||
| Infrastructure | 3,725 | 633 | — | 56 | 4,414 | ||||||||||
| Insurance | 4,092 | 10 | (384 | ) | 108 | 3,826 | |||||||||
| NBC Universal | 6,730 | 9,944 | — | (2 | ) | 16,672 | |||||||||
| Transportation | 3,204 | 53 | — | (12 | ) | 3,245 | |||||||||
| Total | $ | 47,769 | $ | 21,458 | $ | — | $ | 1,964 | $ | 71,191 | |||||
| (a) | Included $1,055 million of goodwill associated with the consolidation of Penske effective January 1, 2004. |
| 2003 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In millions) | Balance January 1 |
Acquisitions/ purchase accounting adjustments |
Currency exchange and other | Balance December 31 | |||||||||||
| Advanced Materials | $ | 2,077 | $ | 720 | $ | 13 | $ | 2,810 | |||||||
| Commercial Finance | 8,469 | 183 | 84 | 8,736 | |||||||||||
| Consumer Finance | 5,562 | 1,294 | 923 | 7,779 | |||||||||||
| Consumer & Industrial | 720 | 15 | 60 | 795 | |||||||||||
| Energy | 3,374 | 450 | 388 | 4,212 | |||||||||||
| Equipment & Other Services | 887 | 29 | 4 | 920 | |||||||||||
| Healthcare | 2,898 | 1,846 | 22 | 4,766 | |||||||||||
| Infrastructure | 3,192 | 365 | 168 | 3,725 | |||||||||||
| Insurance | 4,176 | 12 | (96) | 4,092 | |||||||||||
| NBC Universal | 5,223 | 1,507 | — | 6,730 | |||||||||||
| Transportation | 2,842 | 354 | 8 | 3,204 | |||||||||||
| Total | $ | 39,420 | $ | 6,775 | $ | 1,574 | $ | 47,769 | |||||||
The amount of goodwill related to new acquisitions during 2004 was $20,958 million, the largest of which were the combination of NBC and Vivendi Universal Entertainment LLLP (VUE) and the acquisitions of Amersham by Healthcare and InVision Technologies, Inc. ($618 million) by Infrastructure.
The amount of goodwill related to purchase accounting adjustments to prior-year acquisitions during 2004 was $500 million, primarily associated with the 2003 acquisition of Instrumentarium at Healthcare and Allbank and First National Bank at Consumer Finance.
The amount of goodwill related to new acquisitions recorded during 2003 was $6,602 million, the largest of which were Instrumentarium ($1,754 million) by Healthcare, Bravo ($1,473 million) by NBC Universal and First National Bank ($680 million) by Consumer Finance.
The amount of goodwill related to purchase accounting adjustments to prior-year acquisitions during 2003 was $173 million, primarily associated with the 2002 acquisitions of several businesses at Infrastructure, Australian Guarantee Corporation at Consumer Finance and Security Capital Group at Commercial Finance.
Upon closing an acquisition, we estimate the fair values of assets and liabilities acquired and consolidate the acquisition as quickly as possible. Given the time it takes to obtain pertinent information to finalize the acquired company’s balance sheet (frequently with implications for the price of the acquisition), then to adjust the acquired company’s accounting policies, procedures, books and records to our standards, it is often several quarters before we are able to finalize those initial fair value estimates. Accordingly, it is not uncommon for our initial estimates to be subsequently revised.
INTANGIBLE ASSETS SUBJECT TO AMORTIZATION
| December 31 (In millions) | Gross carrying amount | Accumulated amortization | Net | ||||||
|---|---|---|---|---|---|---|---|---|---|
| 2004 | |||||||||
| Patents, licenses and other | $ | 6,366 | $ | (1,131 | ) | $ | 5,235 | ||
| Capitalized software | 5,466 | (2,814 | ) | 2,652 | |||||
| PVFP | 3,382 | (1,956 | ) | 1,426 | |||||
| Servicing assets and all other | 4,739 | (4,037 | ) | 702 | |||||
| Total | $ | 19,953 | $ | (9,938 | ) | $ | 10,015 | ||
| 2003 | |||||||||
| Patents, licenses and other | $ | 2,685 | $ | (806 | ) | $ | 1,879 | ||
| Capitalized software | 4,911 | (2,433 | ) | 2,478 | |||||
| PVFP | 3,348 | (1,786 | ) | 1,562 | |||||
| Servicing assets and all other | 4,634 | (3,809 | ) | 825 | |||||
| Total | $ | 15,578 | $ | (8,834 | ) | $ | 6,744 | ||
Indefinite-lived intangible assets were $2,034 million and $512 million at December 31, 2004 and 2003, respectively, and principally comprised trademarks, tradenames and U.S. Federal Communications Commission licenses.
Consolidated amortization expense related to intangible assets, subject to amortization, for 2004 and 2003 was $1,656 million and $1,497 million, respectively.
Changes in PVFP balances follow.
| (In millions) | 2004 | 2003 | ||||
|---|---|---|---|---|---|---|
| Balance at January 1 | $ | 1,562 | $ | 2,457 | ||
| Acquisitions | — | 46 | ||||
| Dispositions | — | (658 | ) | |||
| Accrued interest(a) | 90 | 113 | ||||
| Amortization | (221 | ) | (351 | ) | ||
| Other | (5 | ) | (45 | ) | ||
| Balance at December 31 | $ | 1,426 | $ | 1,562 | ||
| (a) | Interest was accrued at a rate of 6.3% and 4.3% for 2004 and 2003, respectively. |
Recoverability of PVFP is evaluated periodically by comparing the current estimate of expected future gross profits with the unamortized asset balance. If such comparison indicates that the expected gross profits will not be sufficient to recover PVFP, the difference is charged to expense. No such expense was recorded in 2004 or 2003.
Amortization expense for PVFP in future periods will be affected by acquisitions, realized capital gains/losses or other factors affecting the ultimate amount of gross profits realized from certain lines of business. Similarly, future amortization expense for other intangibles will depend on acquisition activity and other business transactions.
The estimated percentage of the December 31, 2004, net PVFP balance to be amortized over each of the next five years follows.
| 2005 | 2006 | 2007 | 2008 | 2009 | |||||
|---|---|---|---|---|---|---|---|---|---|
| 8.9 | % | 8.3 | % | 7.2 | % | 6.3 | % | 5.3 | % |
SIGNIFICANT ACQUISITIONS AND COMBINATIONS
In April 2004, we acquired all of the outstanding common shares of Amersham plc, a world leader in medical diagnostics and life sciences. The total purchase price of $11,279 million included 341.7 million shares of GE common stock valued at $10,674 million, cash of $150 million and assumed debt of $455 million. Preliminary allocation of the purchase price assigned $8,217 million to goodwill, $2,704 million to identified intangible assets that will be amortized over periods ranging from five to 25 years, $158 million to acquired inventories and $99 million to acquired in-process research and development projects charged to operations in the second quarter of 2004.
In May 2004, we completed the combination of NBC with VUE and certain related assets to create one of the world’s leading media companies, NBC Universal, Inc. (NBC Universal). Twenty percent of NBC Universal’s shares were issued to a subsidiary of Vivendi Universal (VU) as partial consideration for VU’s interest in VUE and the related assets. NBC’s acquired interest in VUE and the related assets was valued at $14,429 million, for which we exchanged the NBC Universal shares, paid cash to certain VUE interest holders of $3,650 million and assumed debt of $2,498 million. In March 2004, we issued 119.4 million shares of our common stock for net cash proceeds of $3,765 million, and we used most of those proceeds to fund the $3,650 million we paid in this transaction. The preliminary allocation of our acquired interest assigned $9,944 million to goodwill, $1,516 million to indefinite-lived intangibles and $310 million to identified intangible assets that will be amortized over periods ranging from two to 20 years. As a result of issuing the NBC Universal shares, we essentially disposed of 20% of NBC, and therefore recorded an increase in shareowners’ equity of $2,153 million, net of taxes of $1,439 million. The holders of 5.44% of the VUE common interests did not participate in the transaction and remained a minority interest holder of VUE at December 31, 2004. This minority interest holder also owns a $758 million preferred interest in VUE that is mandatorily redeemable for cash in 2022. The present value of that obligation is reported in the caption “All other liabilities” in the Statement of Financial Position, while U.S. Treasury securities held by VUE in approximately the same amount and designated to repay this obligation are included in the caption “All other assets” in the Statement of Financial Position.
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