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GOODWILL AND INTANGIBLE ASSETS | 9 Months Ended
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Sep. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract] |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS The Company assesses both goodwill and indefinite-lived intangible assets for impairment annually as of April 1 or more frequently if events or changes in circumstances indicate the asset might be impaired. In preparing its financial statements for the quarter ended September 30, 2022, the Company identified indicators of a "more likely than not" impairment related to its Digital Dental Group and Equipment & Instruments reporting units, included within the Technologies & Equipment segment. The Company has experienced adverse macroeconomic factors as a result of weakened global demand, higher cost of capital, unfavorable foreign currency impacts, and increased raw material, supply chain and service costs, which are contributing to reduced forecasted revenues, lower operating margins, and reduced expectations for future cash flows. The fair values of the two reporting units above were computed using a discounted cash flow model with inputs developed using both internal and market-based data. The Company's significant assumptions in the discounted cash flow model included, but were not limited to, the weighted average cost of capital, revenue growth rates (including perpetual growth rates), and operating margin percentages of the reporting unit's business. As a result, the Company recorded a pre-tax goodwill impairment charge related to the Digital Dental Group and Equipment & Instruments reporting units within the Technologies & Equipment segment of $1,100 million and $87 million, respectively. The timing of this impairment charge in the third quarter was the result of current macroeconomic conditions, including the rising interest rate environment and broad declines in equity valuations. Since the second quarter, core underlying market interest rates, which serve as the basis for the discount rate assumptions in our impairment models, rose by approximately 200 basis points. Further, earnings forecasts were reduced for several reporting units as these forecasts were impacted by ongoing macroeconomic forces. Global demand has weakened for certain products in the third quarter as inflationary pressures impacted the discretionary spending behavior of our customers, which has introduced new competitive challenges. Additionally, raw materials, supply chain, and service costs have all increased due to changes in our business model and broad inflationary trends. At September 30, 2022, the remaining goodwill related to the Digital Dental Group and Equipment & Instruments reporting units was $234 million and $192 million, respectively. As the fair value of these reporting units approximate carrying value as of September 30, 2022, any further decline in key assumptions could result in additional impairment in future periods. Based on quantitative analysis performed for the other three reporting units within the Technologies & Equipment and Consumables segments, the Company believes there is no indication that the carrying value "more likely than not" exceeds the fair value in each case as of September 30, 2022; however, any further deterioration in key assumptions could result in impairment charges in the future. For the Company's reporting units that were not impaired, the Company applied a hypothetical sensitivity analysis by increasing the discount rate of these reporting units by 100 basis points and, in a separate test, reducing by 10% the fair value of those reporting units. If discount rates were hypothetically increased by 100 basis points at September 30, 2022, one reporting unit within the Technologies & Equipment segment would have an estimated fair value less than 10% in excess of its carrying value. Goodwill associated with this reporting unit was $1,068 million at September 30, 2022. In preparing the financial statements for the quarter ended September 30, 2022, in conjunction with the goodwill impairment, the Company tested the intangible assets related to the businesses within the Digital Dental Group and Equipment & Instruments reporting units within the Technologies & Equipment segment for impairment. The Company also identified an indicator of impairment for indefinite-lived intangible assets within the Consumables reporting unit within the Consumables segment. Intangible assets were evaluated for impairment using an income approach, specifically a relief from royalty method, or using a qualitative assessment. The Company's significant assumptions in the relief from royalty method included, but were not limited to, revenue growth rates (including perpetual growth rates), royalty rates, and discount rates. As a result, the Company recorded an impairment charge of $66 million, $26 million and $2 million for the Digital Dental Group, Equipment & Instruments and Consumables reporting units, respectively, for its indefinite-lived intangible assets for the three months ended September 30, 2022. The impairment charge was primarily driven by macroeconomic factors such as higher cost of capital, cost inflation, unfavorable foreign currency impacts, and increased supply chain costs, which are contributing to reduced forecasted revenues, lower operating margins, and reduced expectations for future cash flows. This charge was recorded in Intangible asset impairment and other costs in the Consolidated Statements of Operations. As the fair value of these indefinite-lived intangible assets approximate carrying value as of September 30, 2022, any further decline in key assumptions could result in additional impairment in future periods. Based on qualitative assessments performed on the indefinite-lived intangible assets related to the businesses in the two other reporting units within the Technologies & Equipment segment, the Company believes there is no indication that the carrying value "more likely than not" exceeds the fair value of these intangible assets in each case as of September 30, 2022; however, any further deterioration in key assumptions could result in impairment charges in the future. For the Company’s indefinite-lived intangible assets that were not impaired, the Company applied a hypothetical sensitivity analysis. If the fair value of each of these indefinite-lived intangibles assets had been hypothetically reduced by 10% or the discount rate had been hypothetically increased by 100 basis points as of September 30, 2022, the fair value of certain indefinite-lived intangible assets within the Technologies & Equipment and Consumables segments would be less than book value and are considered at-risk based on the sensitivity analysis. The carrying value of these indefinite-lived intangibles within the Technologies & Equipment and Consumables segments was $43 million and $30 million, respectively, at September 30, 2022. Any deviation in actual financial results compared to the forecasted financial results or valuation assumptions used in the annual or interim tests, a decline in equity valuations, increases in interest rates, or changes in the use of intangible assets, among other factors, could have a material adverse effect to the fair value of either the reporting units or intangible assets and could result in a future impairment charge. There can be no assurance that the Company’s future asset impairment testing will not result in a material charge to earnings.
A reconciliation of changes in the Company’s goodwill by reportable segment were as follows:
(in millions) |  | Technologies & Equipment |  | Consumables |  | Total
Balance at December 31, 2021 |  |  |  |  |  |
Goodwill |  | $ | 5,989 |  |  | $ | 880 |  |  | $ | 6,869 |
Accumulated impairment losses |  | (2,893) |  |  | — |  |  | (2,893) |
Goodwill, net |  | $ | 3,096 |  |  | $ | 880 |  |  | $ | 3,976 |
Impairment |  | (1,187) |  |  | — |  |  | (1,187) |
Translation and other |  | (170) |  |  | (35) |  |  | (205) |
Balance at September 30, 2022 |  |  |  |  |  |
Goodwill |  | $ | 5,819 |  |  | $ | 845 |  |  | $ | 6,664 |
Accumulated impairment losses |  | (4,080) |  |  | — |  |  | (4,080) |
Goodwill, net |  | $ | 1,739 |  |  | $ | 845 |  |  | $ | 2,584 |
Identifiable definite-lived and indefinite-lived intangible assets were as follows:
|  | September 30, 2022 |  | December 31, 2021
(in millions) |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Developed technology and patents |  | $ | 1,569 |  |  | $ | (764) |  |  | $ | 805 |  |  | $ | 1,729 |  |  | $ | (762) |  |  | $ | 967 |
Tradenames and trademarks |  | 269 |  |  | (90) |  |  | 179 |  |  | 269 |  |  | (79) |  |  | 190 |
Licensing agreements |  | 31 |  |  | (26) |  |  | 5 |  |  | 36 |  |  | (32) |  |  | 4 |
Customer relationships |  | 1,005 |  |  | (553) |  |  | 452 |  |  | 1,091 |  |  | (545) |  |  | 546 |
Total definite-lived |  | $ | 2,874 |  |  | $ | (1,433) |  |  | $ | 1,441 |  |  | $ | 3,125 |  |  | $ | (1,418) |  |  | $ | 1,707 |
Indefinite-lived tradenames and trademarks |  | $ | 426 |  |  | $ | — |  |  | $ | 426 |  |  | $ | 598 |  |  | $ | — |  |  | $ | 598 |
In-process R&D (a) |  | 8 |  |  | — |  |  | 8 |  |  | 14 |  |  | — |  |  | 14 |
Total indefinite-lived |  | $ | 434 |  |  | $ | — |  |  | $ | 434 |  |  | $ | 612 |  |  | $ | — |  |  | $ | 612 |
Total identifiable intangible assets |  | $ | 3,308 |  |  | $ | (1,433) |  |  | $ | 1,875 |  |  | $ | 3,737 |  |  | $ | (1,418) |  |  | $ | 2,319 |
(a) Intangible assets acquired in a business combination that are in-process and used in research and development ("R&D") activities are considered indefinite-lived until the completion or abandonment of the R&D efforts. The useful life and amortization of those assets will be determined once the R&D efforts are completed. During the third quarter of 2022, the completion of certain R&D activities occurred, resulting in the reclassification of $5 million of in-process R&D to in-service assets with a definite life. During the second quarter of 2021, the Company purchased certain developed technology rights for an initial payment of $3 million. The purchase consideration also includes minimum guaranteed contingent payments of $17 million to be made upon reaching certain regulatory and commercial milestones. The contingent payments are not yet considered probable of payment as of September 30, 2022.

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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 https://asc.fasb.org/topic&trid=2144416 + Details
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