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INTANGIBLE FRANCHISE RIGHTS AND GOODWILL | 12 Months Ended
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Dec. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract] |
INTANGIBLE FRANCHISE RIGHTS AND GOODWILL | INTANGIBLE FRANCHISE RIGHTS AND GOODWILL The Company evaluates its intangible assets, including goodwill, for impairment annually, or more frequently if events or circumstances indicate possible impairment. Refer to Note 1. Basis of Presentation, Consolidation and Summary of Accounting Policies for further discussion of the Company’s accounting policies relating to impairment testing. For the October 31, 2021, annual goodwill impairment assessment, the Company elected to perform a qualitative assessment and determined that it was not more-likely-than-not that the fair values of the Company’s reporting units were less than their carrying values. The qualitative assessment included a review of changes, since the last quantitative assessment was performed, in those assumptions having the most significant impact on the current year fair value. When a quantitative impairment assessment is performed, the Company estimates fair value of goodwill using a combination of the discoun ted cash flow, or income approach, and the market approach. The Company weights the income approach and market approach 80% and 20%, respe ctively, in the fair value model. For intangible franchise rights, the fair value of the respective franchise right is estimated using a discounted cash flow, or income approach. The income approach measures fair value by discounting expected future cash flows at a WACC that proportionately weights the cost of debt and equity. Significant assumptions in the model include revenue growth rates, future EBITDA margins, the WACC and terminal growth rates. The Company applies a five-year projection period which aligns with the Company’s strategic plan. Key considerations in the assumed growth rates include industry SAAR projections, macroeconomic conditions including consumer confidence levels, unemployment rates and gross domestic product growth, and internal measures such as historical financial performance, cost control and planned capital expenditures. Beyond the five forecasted years, the terminal value is determined using a perpetuity growth rate based on long-term inflation projections for each reporting unit. Significant inputs to the WACC include the risk-free rate, an adjustment for stock market risk, an adjustment for company size risk and country risk adjustments for the U.K. For the market approach, the Company utilizes recent market multiples of guideline companies for both revenue and pre-tax net income weighted as appropriate by reporting unit. Each of the significant assumptions to the fair value model are considered level 3 inputs within the fair value hierarchy described further in Note 7. Financial Instruments and Fair Value Measurements. Developing these assumptions requires applying management’s knowledge of the industry, recent transactions and reasonable performance expectations for its operations. For the October 31, 2021 annual intangible franchise rights assessment, the Company elected to perform a qualitative assessment. Based on the results of the qualitative assessment, certain dealerships required a quantitative test based on their actual results through October 31, 2021, and an update of the annual budget in the fourth quarter of 2021. To perform the intangible franchise rights quantitative assessment, the Company estimated the fair values of the respective franchise rights using a discounted cash flow, or income approach, following the income approach as described for goodwill. However, this resulted in no franchise rights impairment charges for the year ended December 31, 2021. No impairment was recorded for intangible franchise rights during the year ended December 31, 2021. During the year ended December 31, 2020, the Company recorded impairment charges of $9.7 million in the U.S. segment and $11.1 million in the U.K. segment on intangible franchise rights. During the year ended December 31, 2019, the Company recorded impairment charges of $13.4 million in the U.S. segment and $5.6 million in the U.K. segment on intangible franchise rights. During the year ended December 31, 2021, the Company recorded additional indefinite-lived intangible franchise rights acquired through business combinations of $161.2 million in the U.S. segment and $1.2 million in the U.K. segment. Duri ng the year ended December 31, 2020, no additional intangible franchise rights were acquired through business combinations. Refer to Note 3. Acquisitions for further discussion of the Company’s acquisitions. The following table presents the Company’s intangible franchise rights balances by segment as of December 31, 2021 and 2020 (in millions):
|  | Intangible Franchise Rights
|  | U.S. |  | U.K. |  |  |  | Total
Balance, December 31, 2020 |  | $ | 213.4 |  |  | $ | 19.4 |  |  |  |  | $ | 232.8 |
Balance, December 31, 2021 |  | $ | 372.0 |  |  | $ | 20.4 |  |  |  |  | $ | 392.3 |
The following is a roll-forward of the Company’s goodwill accounts by reporting unit (in millions):
|  | Goodwill
|  | U.S. |  | U.K. |  |  |  | Total
Balance, December 31, 2019 (1) |  | $ | 902.3 |  |  | $ | 92.1 |  |  |  |  | $ | 994.5 |
Additions through acquisitions |  | 1.4 |  |  | — |  |  |  |  | 1.4 |
Disposals |  | (2.0) |  |  | — |  |  |  |  | (2.0) |
Currency translation |  | — |  |  | 3.2 |  |  |  |  | 3.2 |
Balance, December 31, 2020 (1) |  | $ | 901.7 |  |  | $ | 95.4 |  |  |  |  | $ | 997.1 |
Additions through acquisitions |  | 434.6 |  |  | 18.9 |  |  |  |  | 453.5 |
Disposals |  | (4.1) |  |  | — |  |  |  |  | (4.1) |
Reclassified to assets held for sale |  | (25.0) |  |  | — |  |  |  |  | (25.0) |
Currency translation |  | — |  |  | (1.3) |  |  |  |  | (1.3) |
Balance, December 31, 2021 |  | $ | 1,307.3 |  |  | $ | 112.9 |  |  |  |  | $ | 1,420.2 |
(1) Net of accumulated impairments of $40.6 million in the U.S. reporting unit.

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