United Parcel Service, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2022

The following table indicates the allocation of goodwill (in millions):


	U.S. Domestic Package		International Package		Supply Chain Solutions		Consolidated
Balance as of January 1, 2021	$	715	$	422	$	2,230	$	3,367
Acquired	132		—		243		375

Currency / Other	—		(19)		(31)		(50)
Balance as of December 31, 2021	$	847	$	403	$	2,442	$	3,692
Acquired	—		105		491		596
Currency / Other	—		(16)		(49)		(65)
Balance as of December 31, 2022	$	847	$	492	$	2,884	$	4,223

2022 Goodwill Activity

The goodwill acquired during 2022 primarily relates to our acquisitions of Delivery Solutions in May 2022 and Bomi Group in November 2022. Goodwill associated with Delivery Solutions is reported in Supply Chain Solutions. Goodwill associated with Bomi Group is reported in International Package and Supply Chain Solutions. The purchase price allocation for acquired businesses may be modified for up to one year from the date of acquisition if additional facts or circumstances lead to changes in our preliminary purchase accounting estimates. See note 8 for further discussion of business acquisitions.

The remaining change in goodwill for both Supply Chain Solutions and International Package was attributable to the impact of changes in the value of the U.S. Dollar on the translation of non-U.S. Dollar goodwill balances.

2021 Goodwill Activity

The goodwill acquired in U.S. Domestic Package and Supply Chain Solutions relates to our October 2021 acquisition of Roadie. See note 8 for further discussion of business acquisitions.

Goodwill Impairment

We complete our annual goodwill impairment evaluation as of July 1st on a reporting unit basis. Our annual impairment testing indicated that the fair value of goodwill associated with our Roadie reporting unit remained greater than its carrying value as of our July 1st testing date, although this excess was less than 10 percent. The goodwill associated with our Roadie reporting unit as of December 31, 2022 was $241 million. We did not identify any triggering events for the periods presented that required an interim impairment test.

We did not record any goodwill impairment charges for the years ended December 31, 2022 and 2021. During 2020, we recorded a goodwill impairment charge of $494 million in connection with designating our UPS Freight business as held for sale. Cumulatively, we have recorded $1.1 billion of goodwill impairment charges in Supply Chain Solutions, while our International and U.S. Domestic Package segments have not recorded any goodwill impairment charges.

Intangible Assets

The following is a summary of intangible assets as of December 31, 2022 and 2021 (in millions):


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Weighted-Average Amortization Period (in years)
December 31, 2022
Capitalized software	$	5,186	$	(3,500)	$	1,686	6.9
Licenses	55		(30)		25		3.3
Franchise rights	226		(37)		189		20.0
Customer relationships	872		(453)		419		10.2
Trade name	125		(8)		117		7.2
Trademarks, patents and other	183		(27)		156		8.0
Amortizable intangible assets	$	6,647	$	(4,055)	$	2,592	7.8
Indefinite-lived intangible assets	204		—		204
Total Intangible Assets	$	6,851	$	(4,055)	$	2,796
December 31, 2021
Capitalized software	$	4,910	$	(3,275)	$	1,635
Licenses	58		(27)		31
Franchise rights	119		(37)		82
Customer relationships	733		(408)		325
Trade name	67		(1)		66
Trademarks, patents and other	158		(15)		143
Amortizable intangible assets	$	6,045	$	(3,763)	$	2,282
Indefinite-lived intangible assets	204		—		204
Total Intangible Assets	$	6,249	$	(3,763)	$	2,486

A trade name and licenses with carrying values of $200 and $4 million, respectively, as of December 31, 2022 are deemed to be indefinite-lived intangible assets, and therefore are not amortized. Impairment tests for indefinite-lived intangible assets are performed annually. There were no events or changes in circumstances that would indicate the carrying amount of our indefinite-lived intangible assets may have been impaired as of December 31, 2022.

All of our other recorded intangible assets are deemed to be finite-lived intangibles, and are amortized over their estimated useful lives. Impairment tests for these intangible assets are only performed when a triggering event occurs that may indicate that the carrying value of the intangible may not be recoverable. Impairments of finite-lived intangible assets were $17, $19 and $13 million in 2022, 2021, and 2020, respectively.

Amortization of intangible assets was $525, $475 and $416 million in each of 2022, 2021 and 2020, respectively. Expected amortization of finite-lived intangible assets recorded as of December 31, 2022 for the next five years is as follows (in millions): 2023—$595; 2024—$512; 2025—$432; 2026—$334; 2027—$257. Amortization expense in future periods will be affected by business acquisitions and divestitures, software development, licensing agreements, purchases of development areas or similar franchise rights and other factors.