Identifiable Intangible Assets

12 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis each September 1st and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We performed the annual impairment testing at September 1, 2022 and recognized a $6.8 million goodwill impairment charge related to a reporting unit within our Water Flow Solutions segment as the carrying value exceeded its fair value primarily due to an increase in the discount rate.

The carrying value of the reporting unit, including goodwill, is compared with the estimated fair value of the reporting unit as determined utilizing a combination of the income and market approaches. The income approach, which involved significant unobservable inputs (Level 3 inputs), is based on projected debt-free cash flow which is discounted to the present value using discount rates that consider the timing and risk of the cash flows. The market approach is based on the guideline public company method, which uses market multiples to value our reporting units. The Company weights the income and market approaches in a manner considering the risks of the underlying cash flows. The key assumptions used in estimating the fair value of the Company's reporting units utilizing the income approach include management's best estimate of revenue, EBITDA margin, and discount rate, and accordingly, a change in market conditions or other factors could have a material effect on the estimated values. There are inherent uncertainties related to the assumptions used and to management's application of these assumptions.

Intangible Assets

Direct internal and external costs to develop software used in the provision of services to customers by Water Management Solutions are capitalized and amortized over the 6-year estimated useful life of the software, beginning when the software is ready for its intended use. At September 30, 2022, the remaining weighted-average amortization period for this software was 3.6 years. Amortization expense related to such software assets was $2.9 million in 2022, and $3.3 million in each of fiscal years 2021 and 2020. Amortization expense for each of the next five years is expected to be $3.1 million in 2023, $2.5 million in 2024, $1.5 million in 2025, $0.9 million in 2026, and $0.5 million in 2027.

At September 30, 2022, the remaining weighted-average amortization period for business combination-related finite-lived customer relationships and technology intangible assets were 3.3 years and 8.5 years, respectively. Amortization expense related to these assets was $25.5 million, $25.2 million and $24.9 million for 2022, 2021 and 2020, respectively. Amortization expense for each of the next five years is scheduled to be $25.1 million in 2023, $24.6 million in 2024, $5.6 million in 2025, $4.9 million in 2026 and $4.7 million in 2027.

Intangible assets are presented below.


	September 30,
	2022		2021
	(in millions)
Capitalized internal-use software:
Cost	$	35.5	$	34.1
Accumulated amortization	(26.8)		(24.1)
Capitalized internal-use software, net	$	8.7	$	10.0

Business combination-related:
Cost:
Finite-lived intangible assets:
Technology	119.9		123.5
Customer relationships and other	371.6		373.0
Indefinite-lived intangible assets:
Trade names and trademarks	272.7		273.8
	$	764.2	$	770.3
Accumulated amortization:
Technology	(89.5)		(85.8)
Customer relationships and other	(322.2)		(302.0)
	(411.7)		(387.8)
Business combination-related intangible assets, net	352.5		382.5
Intangible assets, net	$	361.2	$	392.5

Goodwill

We recognized a $6.8 million goodwill impairment charge related to a reporting unit within our Water Flow Solutions segment in our fiscal year 2022. As of September 30, 2022, our remaining goodwill balance is within our Water Management Solutions segment. Changes in the carrying amount of goodwill for the years ended September 30, 2022 and 2021 were as follows: