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Intangible Assets | 8 Months Ended
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Sep. 03, 2022
Goodwill and Intangible Assets Disclosure [Abstract] |
Intangible Assets | Intangible Assets Indefinite-lived intangible assets are not amortized and are assessed for impairment at least annually, using either a qualitative or quantitative approach. We perform this annual assessment during our third quarter, or more frequently if circumstances indicate that the carrying value may not be recoverable. Where we use the qualitative assessment, first we determine if, based on qualitative factors, it is more likely than not that an impairment exists. If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed. In the quantitative assessment for indefinite-lived intangible assets, an assessment is performed to determine the fair value of the indefinite-lived intangible asset. Estimated fair value is determined using discounted cash flows and requires an analysis of several estimates including future cash flows or income consistent with management’s strategic business plans, annual sales growth rates, perpetuity growth assumptions and the selection of assumptions underlying a discount rate (weighted-average cost of capital) based on market data available at the time. Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors (including those related to the Russia-Ukraine conflict) to estimate future levels of sales, operating profit or cash flows. All assumptions used in our impairment evaluations for indefinite-lived intangible assets, such as forecasted growth rates (including perpetuity growth assumptions) and weighted-average cost of capital, are based on the best available market information and are consistent with our internal forecasts and operating plans. A deterioration in these assumptions could adversely impact our results. In the second quarter of 2022, macroeconomic factors, sanctions and other regulations as a result of the Russia-Ukraine conflict indicated a material deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in Russia, primarily assumptions underlying the weighted-average cost of capital. These factors required us to perform a quantitative assessment, despite the absence of a material adverse impact on these assets’ financial performance (e.g., sales, operating profit, cash flows). The fair value of our indefinite-lived intangible assets in Russia was estimated using discounted cash flows under the income approach, which we consider to be a Level 3 measurement. We determined that the carrying value exceeds the fair value, with the decrease in the fair value primarily attributable to a significant increase in the weighted-average cost of capital, which reflects the macroeconomic uncertainty in Russia. As a result of the quantitative assessment, in the 36 weeks ended September 3, 2022, we recorded pre-tax impairment charges of $1.2 billion ($958 million after-tax or $0.69 per share) in impairment of intangible assets, related to our juice and dairy brands in Russia in our Europe division. See Note 1 for further information. During the 36 weeks ended September 3, 2022, we discontinued or repositioned certain juice and dairy brands in Russia in our Europe division. As a result, we recognized pre-tax impairment charges (Brand Portfolio Impairment Charges) of $241 million ($193 million after-tax or $0.14 per share) in impairment of intangible assets, primarily related to indefinite-lived intangible assets. In light of the current political and economic environment, we will continue to review and analyze our brand portfolio worldwide. See Note 1 for further information. The annual impairment assessment on indefinite-lived intangible assets performed in the third quarter of 2022 resulted in no impairment. The estimated fair values of certain beverage businesses and brands in Europe exceeded their carrying values. However, there could be impairments of the carrying values of goodwill and brands associated with these businesses if future performance does not achieve our expected future cash flows or if macroeconomic conditions result in a future increase in the weighted average cost of capital used to estimate fair value. For further information on our policies for indefinite-lived intangible assets, refer to Note 2 to our consolidated financial statements in our 2021 Form 10-K. A summary of our amortizable intangible assets is as follows:
|  | 9/3/2022 |  | 12/25/2021
|  | Gross |  | Accumulated Amortization |  | Net |  | Gross |  | Accumulated Amortization |  | Net
Acquired franchise rights (a) |  | $ | 844 |  |  | $ | (197) |  |  | $ | 647 |  |  | $ | 976 |  |  | $ | (187) |  |  | $ | 789 |
Customer relationships |  | 596 |  |  | (243) |  |  | 353 |  |  | 623 |  |  | (227) |  |  | 396 |
Brands |  | 1,102 |  |  | (971) |  |  | 131 |  |  | 1,151 |  |  | (989) |  |  | 162 |
Other identifiable intangibles |  | 448 |  |  | (265) |  |  | 183 |  |  | 451 |  |  | (260) |  |  | 191 |
Total |  | $ | 2,990 |  |  | $ | (1,676) |  |  | $ | 1,314 |  |  | $ | 3,201 |  |  | $ | (1,663) |  |  | $ | 1,538 |
(a)Decrease is primarily due to the write-off of our distribution rights for Bang energy drinks. See Note 1 for further information. The change in the book value of indefinite-lived intangible assets is as follows:
| Balance 12/25/2021 |  | Acquisitions |  | Impairment |  | Translation and Other |  | Balance 9/3/2022
FLNA |  |  |  |  |  |  |  |  |
Goodwill | $ | 458 |  |  | $ | — |  |  | $ | — |  |  | $ | (3) |  |  | $ | 455 |
Brands | 340 |  |  | — |  |  | — |  |  | (1) |  |  | 339 |
Total | 798 |  |  | — |  |  | — |  |  | (4) |  |  | 794 |
QFNA |  |  |  |  |  |  |  |  |
Goodwill | 189 |  |  | — |  |  | — |  |  | — |  |  | 189 |
Total | 189 |  |  | — |  |  | — |  |  | — |  |  | 189 |
PBNA |  |  | — |  |  |  |  |  |  |
Goodwill | 11,974 |  |  | — |  |  | — |  |  | (14) |  |  | 11,960 |
Reacquired franchise rights | 7,107 |  |  | — |  |  | — |  |  | (22) |  |  | 7,085 |
Acquired franchise rights (a) | 1,538 |  |  | 177 |  |  | — |  |  | (5) |  |  | 1,710 |
Brands | 2,508 |  |  | — |  |  | — |  |  | — |  |  | 2,508 |
Total | 23,127 |  |  | 177 |  |  | — |  |  | (41) |  |  | 23,263 |
LatAm |  |  |  |  |  |  |  |  |
Goodwill | 433 |  |  | — |  |  | — |  |  | 8 |  |  | 441 |
Brands (b) | 100 |  |  | — |  |  | (29) |  |  | 6 |  |  | 77 |
Total | 533 |  |  | — |  |  | (29) |  |  | 14 |  |  | 518 |
Europe (c) |  |  |  |  |  |  |  |  |
Goodwill | 3,700 |  |  | — |  |  | — |  |  | 103 |  |  | 3,803 |
Reacquired franchise rights | 441 |  |  | — |  |  | — |  |  | (18) |  |  | 423 |
Acquired franchise rights | 158 |  |  | — |  |  | (1) |  |  | (18) |  |  | 139 |
Brands (d) | 4,254 |  |  | — |  |  | (1,420) |  |  | 90 |  |  | 2,924 |
Total | 8,553 |  |  | — |  |  | (1,421) |  |  | 157 |  |  | 7,289 |
AMESA |  |  |  |  |  |  |  |  |
Goodwill | 1,063 |  |  | 14 |  |  | — |  |  | (56) |  |  | 1,021 |
Brands | 205 |  |  | — |  |  | — |  |  | (14) |  |  | 191 |
Total | 1,268 |  |  | 14 |  |  | — |  |  | (70) |  |  | 1,212 |
APAC |  |  |  |  |  |  |  |  |
Goodwill | 564 |  |  | — |  |  | — |  |  | (45) |  |  | 519 |
Brands | 476 |  |  | — |  |  | — |  |  | (34) |  |  | 442 |
Total | 1,040 |  |  | — |  |  | — |  |  | (79) |  |  | 961 |
Total goodwill | 18,381 |  |  | 14 |  |  | — |  |  | (7) |  |  | 18,388 |
Total reacquired franchise rights | 7,548 |  |  | — |  |  | — |  |  | (40) |  |  | 7,508 |
Total acquired franchise rights | 1,696 |  |  | 177 |  |  | (1) |  |  | (23) |  |  | 1,849 |
Total brands | 7,883 |  |  | — |  |  | (1,449) |  |  | 47 |  |  | 6,481 |
Total | $ | 35,508 |  |  | $ | 191 |  |  | $ | (1,450) |  |  | $ | (23) |  |  | $ | 34,226 |
(a)Acquisitions reflects our agreement with Celsius Holdings, Inc. (Celsius), entered into in the third quarter of 2022, to distribute Celsius energy drinks in the United States. See Note 8 for further information. (b)Impairment reflects our decision to sell or discontinue certain non-strategic brands. See Note 1 for further information. (c)Translation and other primarily represents the appreciation of the Russian ruble. (d)Impairment represents the decrease in fair value as a result of the Russia-Ukraine conflict and the discontinuation or repositioning of certain juice and dairy brands in Russia.

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