Print PageCUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
The following table summarizes the changes in the carrying amount of goodwill for 2007 and 2006:
| Components | Power Generation |
Engine | Distribution | Total | |||||||||||
| Millions | |||||||||||||||
| Goodwill at December 31, 2005 | $ | 332 | $ | 13 | $ | 7 | $ | 6 | $ | 358 | |||||
| Dispositions | — | (3 | ) | — | (1 | ) | (4 | ) | |||||||
| Translation and other | — | 2 | — | — | 2 | ||||||||||
| Goodwill at December 31, 2006 | 332 | 12 | 7 | 5 | 356 | ||||||||||
| Additions | 11 | — | — | 2 | 13 | ||||||||||
| Dispositions | (6 | ) | — | — | — | (6 | ) | ||||||||
| Translation and other | 2 | 1 | (1 | ) | — | 2 | |||||||||
| Goodwill at December 31, 2007 | $ | 339 | $ | 13 | $ | 6 | $ | 7 | $ | 365 | |||||
We have elected to perform the annual impairment test of our recorded goodwill as required by SFAS 142 as of the end of our third quarter. The results of this annual impairment test indicated that the fair value of each of our reporting units as of September 30, 2007 and October 1, 2006, exceeded their carrying, or book value, including goodwill, and therefore our recorded goodwill was not subject to impairment. The fair value was determined utilizing the expected present value of future cash flows.
Intangible assets that have finite useful lives are amortized over their useful lives. The following table summarizes our other intangible assets with finite useful lives that are subject to amortization:
| December 31, | ||||||
| 2007 | 2006 | |||||
| Millions | ||||||
| Software | $ | 276 | $ | 222 | ||
| Accumulated amortization | (114 | ) | (101 | ) | ||
| Net software | 162 | 121 | ||||
| Trademarks, patents and other | 15 | 10 | ||||
| Accumulated amortization | (4 | ) | (3 | ) | ||
| Net trademarks, patents and other | 11 | 7 | ||||
| Total | $ | 173 | $ | 128 | ||
Amortization expense for software and other intangibles totaled $31 million, $27 million and $31 million for the years ended December 31, 2007, 2006 and 2005, respectively. Internal and external software costs (excluding those related to research, re-engineering and training) and trademarks and patents are amortized generally over a three to five-year period. The projected amortization expense of our intangible assets, assuming no further acquisitions or dispositions, is approximately $47 million in 2008, $41 million in 2009, $34 million in 2010, $26 million in 2011 and $16 million in 2012.
The accompanying notes are an integral part of the Consolidated Financial Statements.