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Goodwill and Intangible Assets | 12 Months Ended
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Dec. 31, 2021
Goodwill and Intangible Assets | L. GOODWILL AND INTANGIBLE ASSETS Goodwill Teradyne performs its annual goodwill impairment test as required under the provisions of ASC 350-10, “ Intangibles—Goodwill and Other, ” on December 31 of each fiscal year unless interim indicators of impairment exist. Goodwill is considered to be impaired when the net book value of a reporting unit exceeds its estimated fair value. Teradyne has the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If Teradyne determines this is the case, Teradyne is required to perform a quantitative goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized. If Teradyne determines that it is more likely than not that the fair value of the reporting unit is greater than its carrying amounts, the quantitative goodwill impairment test is not required. In performing the quantitative goodwill impairment test, Teradyne determines the fair value of a reporting unit using the results derived from an income approach and a market approach, weighting the fair value determined under each approach to determine an estimated fair value for a reporting unit. The income approach is estimated through the discounted cash flows (“DCF”) analysis. Determining fair value requires the exercise of significant judgment, including judgments about appropriate discount rates, perpetual growth rates, and the amount and timing of expected future cash flows. Discount rates are based on a weighted average cost of capital (“WACC”), which represents the average rate a business must pay its providers of debt and equity, plus a risk premium. The WACC used to test goodwill is derived from a group of comparable companies. The cash flows employed in the DCF analysis are derived from internal forecasts and external market forecasts. The market approach estimates the fair value of the reporting unit by utilizing the market comparable method which is based on revenue and earnings multiples from comparable companies. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, then the goodwill is written down by the amount that carrying value exceeds the fair value of the reporting unit, but not below zero. On September 15, 2020, Teradyne announced the appointment of Gregory Smith as President of Teradyne’s Industrial Automation reportable segment effective October 1, 2020. With the appointment of Gregory Smith, the Industrial Automation reportable segment, which includes UR, MiR and AutoGuide, is considered one operating segment and one reporting unit. Teradyne performed a goodwill impairment test at the time of the change in operating segments, which indicated the fair value of Teradyne’s reporting units exceeded their carrying values. In the fourth quarter of 2021, Teradyne performed the annual goodwill impairment test, completing a quantitative assessment for the Wireless Test, and System Test reporting units and qualitative assessment for the Industrial Automation reporting unit. There was no impairment as a result of the annual test performed in the fourth quarter of 2021. Key assumptions in the goodwill valuation model are forecasted revenues, discount rate, earnings before interest and taxes, and revenue multiples from comparable companies. A change in any of these key assumptions could result in the reporting unit being impaired in a future period. In the fourth quarter of 2020, Teradyne performed the annual goodwill impairment test, completing a qualitative assessment for the Wireless Test, System Test, and Industrial Automation reporting units. There was no impairment as a result of the annual test performed in the fourth quarter of 2020. Key assumptions in the goodwill valuation model are forecasted revenues, discount rate, earnings before interest and taxes, and revenue multiples from comparable companies. A change in any of these key assumptions could result in the reporting unit being impaired in a future period. The changes in the carrying amount of goodwill by reportable segments for the years ended D e cember 31, 2021 and 2020 are as follows:
|  | Industrial Automation |  |  | Wireless Test |  |  | Semiconductor Test |  |  | System Test |  |  | Total |
|  | (in thousands) |
Balance at December 31, 2019: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  | $ | 396,483 |  |  | $ | 361,819 |  |  | $ | 261,996 |  |  | $ | 158,699 |  |  | $ | 1,178,997 |
Accumulated impairment losses |  |  | — |  |  |  | (353,843 | ) |  |  | (260,540 | ) |  |  | (148,183 | ) |  |  | (762,566 | )
|  |  | 396,483 |  |  |  | 7,976 |  |  |  | 1,456 |  |  |  | 10,516 |  |  |  | 416,431 |
AutoGuide acquisition |  |  | (149 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (149 | )
Foreign currency translation adjustment |  |  | 37,418 |  |  |  | — |  |  |  | 159 |  |  |  | — |  |  |  | 37,577 |
Balance at December 31, 2020: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  |  | 433,752 |  |  |  | 361,819 |  |  |  | 262,155 |  |  |  | 158,699 |  |  |  | 1,216,425 |
Accumulated impairment losses |  |  | — |  |  |  | (353,843 | ) |  |  | (260,540 | ) |  |  | (148,183 | ) |  |  | (762,566 | )
|  |  | 433,752 |  |  |  | 7,976 |  |  |  | 1,615 |  |  |  | 10,516 |  |  |  | 453,859 |
Foreign currency translation adjustment |  |  | (27,781 | ) |  |  | — |  |  |  | (54 | ) |  |  | — |  |  |  | (27,835 | )
Balance at December 31, 2021: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  |  | 405,971 |  |  |  | 361,819 |  |  |  | 262,101 |  |  |  | 158,699 |  |  |  | 1,188,590 |
Accumulated impairment losse s |  |  | — |  |  |  | (353,843 | ) |  |  | (260,540 | ) |  |  | (148,183 | ) |  |  | (762,566 | )
|  | $ | 405,971 |  |  | $ | 7,976 |  |  | $ | 1,561 |  |  | $ | 10,516 |  |  | $ | 426,024 |
Intangible Assets Teradyne reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. There were no events or circumstances indicating that the carrying value of intangible and long-lived assets may not be recoverable in 2021, 2020 and 2019. Amortizable intangible assets consist of the following and are included in intangible assets, net on the balance sheets:
|  | December 31, 2021 |
|  | Gross Carrying Amount (1) |  |  | Accumulated Amortization (1) |  |  | Foreign Currency Translation Adjustment |  |  | Net Carrying Amount |
|  | (in thousands) |
Developed technology |  | $ | 272,547 |  |  | $ | (223,413 | ) |  | $ | (4,093 | ) |  | $ | 45,041 |
Customer relationships |  |  | 57,739 |  |  |  | (48,921 | ) |  |  | 209 |  |  |  | 9,027 |
Tradenames and trademarks |  |  | 59,387 |  |  |  | (37,237 | ) |  |  | (583 | ) |  |  | 21,567 |
Total intangible assets |  | $ | 389,673 |  |  | $ | (309,571 | ) |  | $ | (4,467 | ) |  | $ | 75,635 |
|  | December 31, 2020 |
|  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Foreign Currency Translation Adjustment |  |  | Net Carrying Amount |
|  | (in thousands) |
Developed technology |  | $ | 272,547 |  |  | $ | (210,479 | ) |  | $ | (1,610 | ) |  | $ | 60,458 |
Customer relationships |  |  | 66,239 |  |  |  | (54,524 | ) |  |  | 305 |  |  |  | 12,020 |
Tradenames and trademarks |  |  | 70,120 |  |  |  | (42,344 | ) |  |  | 685 |  |  |  | 28,461 |
Total intangible assets |  | $ | 408,906 |  |  | $ | (307,347 | ) |  | $ | (620 | ) |  | $ | 100,939 |
(1) | In 2021, $19.2 million of amortizable intangible assets became fully amortized and have been eliminated from the gross carrying amount and accumulated amortization.
Aggregate intangible assets amortization expense for the years ended December 31, 2021, 2020, and 2019, was $21.5 million, $30.8 million, and $40.1 million, respectively. Estimated intangible assets amortization expense for each of the five succeeding fiscal years is as follows:
Year |  | Amortization Expense |
|  | (in thousands) |
2022 |  | $ | 20,081 |
2023 |  |  | 19,592 |
2024 |  |  | 19,283 |
2025 |  |  | 11,546 |
2026 |  |  | 2,423 |
Thereafter |  |  | 2,710 |

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- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
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Namespace Prefix: | us-gaap_
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Balance Type: | na
Period Type: | duration