BUSINESS ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS

v2.4.0.6

BUSINESS ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS	12 Months Ended
	Dec. 31, 2012
Business Combinations [Abstract]
BUSINESS ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS	BUSINESS ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS The following table indicates the allocation of goodwill by reportable segment (in millions):   U.S. Domestic Package   International Package   Supply Chain & Freight   Consolidated Balance on January 1, 2011 $ —   $ 377   $ 1,704   $ 2,081 Acquired —   —   46   46 Currency / Other —   (16 )   (10 )   (26 ) Balance on December 31, 2011 $ —   $ 361   $ 1,740   $ 2,101 Acquired —   67   —   67 Currency / Other —   2   3   5 Balance on December 31, 2012 $ —   $ 430   $ 1,743   $ 2,173 Business Acquisitions The increase in goodwill within the International Package segment in 2012 was due to the February acquisition of Kiala S.A. (“Kiala”), a Belgium-based developer of a platform that enables e-commerce retailers to offer their shoppers the option of having goods delivered to a convenient retail location. Kiala currently operates in Belgium, France, Luxembourg, the Netherlands and Spain. The acquisition broadens our service portfolio for business-to-consumer deliveries. The increase in goodwill within the Supply Chain & Freight segment in 2011 was due to the December acquisition of the Pieffe Group (“Pieffe”), an Italian pharmaceutical logistics company. Pieffe offers storage, distribution and other logistics services to some of the world’s leading pharmaceutical companies. Pro forma results of operations have not been presented for these acquisitions, because the effects of these transactions were not material. The results of operations of these acquired companies have been included in our statements of consolidated income from the date of acquisition. The remaining change in goodwill for both the International Package and Supply Chain & Freight segments was due to the impact of changes in the value of the U.S. Dollar on the translation of non-U.S. Dollar goodwill balances. Goodwill Impairment We test our goodwill for impairment annually, as of October 1st, on a reporting unit basis. Our reporting units are comprised of the Europe, Asia, and Americas reporting units in the International Package reporting segment, and the Forwarding, Logistics, UPS Freight, MBE / The UPS Store, and UPS Capital reporting units in the Supply Chain & Freight reporting segment. In assessing our goodwill for impairment, we initially evaluate qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive and it is necessary to calculate the fair value of a reporting unit, then we utilize a two-step process to test goodwill for impairment. First, a comparison of the fair value of the applicable reporting unit with the aggregate carrying value, including goodwill, is performed. We primarily determine the fair value of our reporting units using a discounted cash flow model, and supplement this with observable valuation multiples for comparable companies, as applicable. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, we perform the second step of the goodwill impairment test to determine the amount of impairment loss. The second step includes comparing the implied fair value of the affected reporting unit’s goodwill with the carrying value of that goodwill. We did not have any goodwill impairment charges in 2012, 2011 or 2010. Cumulatively, our Supply Chain & Freight reporting segment has recorded goodwill impairment charges of $622 million, while our International and U.S. Domestic Package segments have not recorded any impairment charges. Intangible Assets The following is a summary of intangible assets at December 31, 2012 and 2011 (in millions):   Gross Carrying Amount   Accumulated Amortization   Net Carrying Value   Weighted- Average Amortization Period (in years) December 31, 2012               Trademarks, licenses, patents, and other $ 163   $ (80 )   $ 83   5.5 Customer lists 131   (79 )   52   11.5 Franchise rights 117   (64 )   53   20.0 Capitalized software 2,197   (1,782 )   415   3.1 Total Intangible Assets, Net $ 2,608   $ (2,005 )   $ 603   4.4 December 31, 2011               Trademarks, licenses, patents, and other $ 146   $ (54 )   $ 92     Customer lists 120   (66 )   54     Franchise rights 109   (58 )   51     Capitalized software 2,014   (1,626 )   388     Total Intangible Assets, Net $ 2,389   $ (1,804 )   $ 585     Licenses with a carrying value of $5 million as of December 31, 2012 are deemed to be indefinite-lived intangibles, and therefore are not amortized. Impairment tests for indefinite-lived intangibles are performed on an annual basis. All of our other recorded intangible assets are deemed to be finite-lived intangibles, and are thus amortized over their estimated useful lives. Impairment tests for these intangible assets are only performed when a triggering event occurs that indicates that the carrying value of the intangible may not be recoverable. There were no impairments of any finite-lived or indefinite-lived intangible assets in 2012, 2011 or 2010. Amortization of intangible assets was $244, $228 and $224 million during 2012, 2011 or 2010, respectively. Expected amortization of finite-lived intangible assets recorded as of December 31, 2012 for the next five years is as follows (in millions): 2013—$252; 2014—$168; 2015—$94; 2016—$14; 2017—$13. Amortization expense in future periods will be affected by business acquisitions, software development, licensing agreements, sponsorships and other factors.