Goodwill And Intangible Assets
|9 Months Ended|
Sep. 30, 2022
|Goodwill And Intangible Assets [Abstract]|
|Goodwill And Intangible Assets||
NOTE 5. GOODWILL AND INTANGIBLE ASSETS
The following table summarizes the balances in goodwill by segment:
We assess the recoverability of our reporting unit’s carrying value of goodwill annually or more often if events or circumstances make it more likely than not that the fair value of the reporting unit is less than its carrying value, such as a significant adverse change in the business climate. If the fair value of the reporting unit is less than its carrying amount, an impairment loss is recognized for the excess carrying amount over the fair value computation. We estimate the reporting unit’s fair value using a combination of the income approach based upon projected discounted cash flows of the reporting unit and the market approach based upon the market multiple of comparable publicly traded companies.
Under the income approach, the estimated discounted cash flows are based on the best information available to us at the time, including supportable assumptions and projections we believe are reasonable. Our discounted cash flow estimates use discount rates that correspond to a weighted-average cost of capital consistent with a market-participant view. The discount rates are consistent with those used for investment decisions and take into account our future operating plans and strategies. Certain other key assumptions utilized, including revenue projections, costs of goods sold, operating expenses and effective tax rates, are based on estimates consistent with those utilized in our annual budgeting and planning process that we believe are reasonable.
The market approach identifies the EBITDA multiples of comparable publicly traded companies. The reporting unit’s EBITDA is multiplied by the market multiple to estimate its current estimated fair value.
Due to a weakening global economy, driven by higher inflation and interest rates, and other factors affecting the market for our Adventure reporting unit products, we reduced our sales projections for the remainder of 2022, and our forecasts for 2023 and beyond in our Adventure reporting unit. As a result, we determined that a triggering event had occurred during the quarter ended September 30, 2022, with respect to our Adventure reporting unit, which required that we perform a quantitative assessment. We assessed the fair value
of this reporting unit using the income-based and market-based approaches described above. As a result of this assessment, the fair value of our Adventure reporting unit exceeded the related carrying value by approximately 11%, thus no impairment of goodwill was recorded.
Indefinite-Lived Intangible Assets
The following table summarizes the changes in indefinite-lived intangible assets:
Similar to the goodwill impairment assessment, Management performs an interim indefinite-lived intangible asset impairment assessment whenever events or circumstances make it more likely than not that an impairment may have occurred, such as a significant adverse change in the business climate. If the carrying value of the indefinite-lived asset is higher than its fair value, the asset is deemed to be impaired and the impairment charge is estimated as the difference.
The Company calculates the fair value of its indefinite-lived intangible assets using the income approach, specifically the relief-from-royalty method. The relief-from-royalty method is used to estimate the cost savings that accrue to the owner of an intangible asset who would otherwise have to pay royalties or license fees on revenues earned through the use of the asset. Internally forecasted revenues, which the Company believes reasonably approximate market participant assumptions, are multiplied by a royalty rate to arrive at the estimated net after tax cost savings. The royalty rate used in the analysis is based on an analysis of empirical, market-derived royalty rates for comparable intangible assets. The net after tax cost savings are discounted using the same weighted-average cost of capital discount rate developed for purposes of the Company's quantitative goodwill impairment test.
As described above, we determined that a triggering event had occurred during the quarter ended September 30, 2022, with respect to certain indefinite-lived intangible assets within our Adventure reporting unit, which required that we perform a quantitative assessment. We assessed the fair value of the Adventure reporting unit indefinite-lived intangible assets using the relief-from-royalty method described above. As a result of this assessment, the fair value of our Adventure reporting unit indefinite-lived intangible assets exceeded the related carrying value by approximately 14%, thus no impairment was recorded.
If we do not achieve the results reflected in the forecasted estimates utilized in our impairment assessments, or if there are changes to market assumptions, our valuation of the reporting unit, including related indefinite-lived intangible assets, could be adversely affected, and we may be required to impair a portion or all of the related goodwill, indefinite-lived intangibles, and other long-lived assets which would adversely affect our operating results in the period of impairment.
Trademarks classified as indefinite-lived intangible assets by brand as of September 30, 2022 and December 31, 2021, were as follows:
Other Intangible Assets, net
The following table summarizes the changes in gross other intangible assets:
Other intangible assets, net of amortization as of September 30, 2022 and December 31, 2021, were as follows:
Amortization expense for the three months ended September 30, 2022 and 2021, was $3,683 and $3,577, respectively, and for the nine months ended September 30, 2022 and 2021 was $11,740 and $5,971, respectively. Future amortization expense for other intangible assets as of September 30, 2022 is as follows:
The entire disclosure for goodwill and intangible assets.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef