66 UNITED TECHNOLOGIES CORPORATION Preliminary Allocation of Consideration Transferred to Net Assets Acquired: ment date. Market participants are assumed to be buyers and sell- ers in the principal (most advantageous) market for the asset or liability. Additionally, fair value measurements for an asset assume the highest and best use of that asset by market participants. Use of different estimates and judgments could yield different results. In determining the fair value of identifiable assets acquired and liabilities assumed, a review was conducted for any significant contingent assets or liabilities existing as of the acquisition date. The preliminary assessment did not note any significant con- tingencies related to existing legal or government action. Based upon our existing practices and phase II environmental assess- ments done on a number of Goodrich sites, we determined that environmental liability obligations of $232 million were assumed in connection with the acquisition. The following amounts represent the preliminary determi- nation of the fair value of identifiable assets acquired and liabilities assumed from the Goodrich acquisition. The final determination of the fair value of certain assets and liabilities will be completed within the one year measurement period from the date of acquisition as required by the FASB ASC Topic 805, “Business Combinations” . The size and breadth of the Goodrich acquisition will necessitate the use of this measurement period to adequately analyze and assess a number of the factors used in establishing the asset and liability fair values as of the acquisition date including the significant contractual and operational factors underlying the customer relationship intangible asset; the final negotiated sales values for businesses that are required to be sold as part of the regulatory approval of the Goodrich acquisition; the assumptions underpinning certain reserves such as those for environmental obligations, and the related tax impacts of any changes made. Any potential adjustments made could be material in relation to the preliminary values presented below: The fair values of the customer relationship and related program intangible assets, which include the related aerospace program OEM and aftermarket cash flows, were determined by using an “income approach” which is the most common valuation approach utilized. Under this approach, the net earnings attribut- able to the asset or liability being measured are isolated using the discounted projected net cash flows. These projected cash flows are isolated from the projected cash flows of the combined asset group over the remaining economic life of the intangible asset or liability being measured. Both the amount and the duration of the cash flows are considered from a market participant perspective. Our estimates of market participant net cash flows considered his- torical and projected pricing, remaining developmental effort, operational performance including company specific synergies, aftermarket retention, product life cycles, material and labor pricing, and other relevant customer, contractual and market factors. Where appropriate, the net cash flows are probability-adjusted to reflect the uncertainties associated with the underlying assump- tions, as well as the risk profile of the net cash flows utilized in the valuation. The probability-adjusted future cash flows are then dis- counted to present value using an appropriate discount rate. The customer relationship and related program intangible assets are being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of theunderlyingprogramsof10to25years. We also identified customer contractual obligations on certain original equipment manufacturing (OEM) development pro- grams where the expected costs exceed the expected revenue under contract. We measured these liabilities under the measure- ment provisions of FASB ASC Topic 820, “Fair Value Measure- ments and Disclosures” , which is based on the price to transfer the obligation to a market participant at the measurement date, assum- ing that the liability will remain outstanding in the marketplace. Based on the estimated net cash outflows of the OEM devel- opmental programs plus a reasonable contracting profit margin required to transfer the contracts to market participants, we recorded assumed liabilities of approximately $2 billion. These In order to allocate the consideration transferred for Good- rich, the fair values of all identifiable assets and liabilities needed to be established. For accounting and financial reporting purposes, fair value is defined under FASB ASC Topic 820, “Fair Value Meas- urements and Disclosures” as the price that would be received upon sale of an asset or the amount paid to transfer a liability in an orderly transaction between market participants at the measure- (DOLLARS IN MILLIONS) Cash and cash equivalents $ 538 Accounts receivable, net 1,182 Inventories and contracts in progress, net 1,729 Future income tax benefits, current 280 Other assets, current 574 Fixed assets 2,342 Intangible assets: Customer relationships and related program assets 8,550 Trademarks 1,550 Other assets 1,831 Short-term borrowings (83) Accounts payable (443) Accrued liabilities (2,242) Long-term debt (2,961) Future pension and postretirement benefit obligations (1,745) Other long-term liabilities: Customer contractual obligations (2,050) Other long-term liabilities (3,758) Non-controlling interests (41) Total identifiable net assets 5,253 Goodwill 11,167 Total consideration transferred $ 16,420