Transocean Ltd. Goodwill & Intangibles Disclosure
Note 7—Goodwill and Other Intangibles
Finite-lived intangible assets—The gross carrying amount and accumulated amortization of our drilling contract intangible assets were as follows (in millions):
Year ended December 31, 2020 | Year ended December 31, 2019 |
| |||||||||||||||||
Gross | Net | Gross | Net |
| |||||||||||||||
carrying | Accumulated | carrying | carrying | Accumulated | carrying |
| |||||||||||||
| amount | amortization | amount |
| amount |
| amortization |
| amount |
| |||||||||
Drilling contract intangible assets | |||||||||||||||||||
Balance, beginning of period |
| $ | 907 | $ | (299) | $ | 608 | $ | 907 | $ | (112) |
| $ | 795 | |||||
Amortization | — | (215) | (215) | — | (187) | (187) | |||||||||||||
Balance, end of period |
| $ | 907 | $ | (514) | $ | 393 | $ | 907 | $ | (299) |
| $ | 608 | |||||
We amortize the drilling contract intangible assets over the remaining contract periods, the longest of which is currently expected to extend through March 2024. As of December 31, 2020, the estimated future amortization was as follows (in millions):
| Total | |||
Years ending December 31, | ||||
2021 |
| $ | 220 | |
2022 | 117 | |||
2023 | 52 | |||
2024 | 4 | |||
Total carrying amount of contract intangible assets | $ | 393 | ||
Goodwill—During the three months ended June 30, 2018, we classified as held for sale and impaired three ultra-deepwater floaters (see Note 6—Drilling Fleet). We identified the impairment of these assets as an indicator that our goodwill may be impaired. In the year ended December 31, 2018, as a result of our interim goodwill impairment test, we recognized a loss of $462 million ($0.99 per diluted share), which had no tax effect, associated with the impairment of the full balance of our goodwill. We estimated the fair value of the contract drilling services reporting unit using the income approach. Our estimate of fair value required us to use significant unobservable inputs, representative of a Level 3 fair value measurement, including assumptions related to the future performance of the reporting unit, such as future commodity prices, projected demand for our services, rig availability and dayrates.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2020 | Mar 1, 2021 | Showing above |
| 2019 | Feb 18, 2020 | |
| 2018 | Feb 19, 2019 | |
| 2015 | Feb 25, 2016 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.