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GOODWILL AND INTANGIBLE ASSETS | 6 Months Ended
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Jun. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract] |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS The Company's policy is to assess goodwill and indefinite-lived intangible assets for impairment annually as of April 1, with more frequent assessments if events or changes in circumstances indicate the asset might be impaired. For the goodwill impairment tests as of April 1, 2024, the fair values of reporting units were computed using a discounted cash flow model with inputs developed using both internal and market-based data. The discounted cash flow model uses ten-year forecasted cash flows plus a terminal value based on capitalizing the last period's cash flows using a perpetual growth rate. The Company's significant assumptions in the discounted cash flow model included, but were not limited to, discount rates (ranging from 9.5% to 10.5%) revenue growth rates (including perpetual growth rates), operating margin percentages, and net working capital changes of the reporting unit's business. Based on these tests, it was determined that the fair values of the reporting units more likely than not exceeded their carrying values, resulting in no goodwill impairment. Indefinite-lived intangible assets were assessed either through a computation of fair value using an income approach, specifically a relief from royalty method for acquired trade names and trademarks, or through a qualitative assessment for in-process R&D. The Company's significant assumptions in the relief from royalty method include, but were not limited to, discount rates (ranging from 10.0% to 13.0%), revenue growth rates (including perpetual growth rates) and royalty rates, all of which were determined using the judgment of management. Other assumptions are consistent with those applied to goodwill impairment testing. These assumptions for both the goodwill and indefinite-lived intangible asset tests were developed in consideration of current market conditions and future expectations which include, but were not limited to, impact from competition and new product developments. Based on these tests, it was determined that the fair values of the indefinite-lived intangible assets more likely than not exceed their carrying values, resulting in no intangible impairment. For the three months ended June 30, 2024, the Company considered qualitative and quantitative factors to determine whether any events or changes in circumstances had resulted in the likelihood that the goodwill or indefinite-lived intangible assets may have become more likely than not impaired during the course of the quarter, and concluded there were no such indicators. The Company applied a hypothetical sensitivity analysis by increasing the discount rate used to value the reporting units by 50 basis points. As of June 30, 2024, the estimated fair value of the Implants & Prosthetics reporting unit within the Orthodontic and Implant Solutions segment exceeded its carrying value by less than 10%. An increase of the discount rate by 50 basis points would result in a material impairment of the Implants & Prosthetics reporting unit. Additionally, if market conditions worsen, such as a further decline in demand for premium implants, the resulting reduction in projected long-term growth rates would also likely lead to a material impairment for this reporting unit. Goodwill associated with Implants & Prosthetics was $1,141 million as of June 30, 2024. The fair values of certain indefinite-lived intangible assets within the Connected Technology Solutions segment continued to approximate carrying values as of June 30, 2024. Any further decline in key assumptions could result in additional impairments in future periods. The carrying value of these assets within the aforementioned segment was $203 million as of June 30, 2024. There is a risk of future impairment charges if there is a decline in the fair value of the reporting units or indefinite-lived intangible assets as a result of, among other things, actual financial results that are lower than forecasts, an adverse change in valuation assumptions, a decline in equity valuations, increases in interest rates, or changes in the use of intangible assets. There can be no assurance that the Company’s future asset impairment testing will not result in a material charge to earnings. Impairment during the Three Months Ended March 31, 2024 In the three months ended March 31, 2024, the Company identified indicators of a more likely than not impairment related to certain indefinite-lived imaging product trade names within the Connected Technology Solutions segment. The decline in fair value of these indefinite-lived trade names was driven by declines in volumes during the three months ended March 31, 2024, which was due in part to a loss in market share from competitive pricing pressures, as well as unfavorable economic conditions in certain markets. These factors contributed to a reduction in forecasted revenues in the near term. The trade names were evaluated for impairment using an income approach, specifically a relief from royalty method. As a result, the Company recorded an indefinite-lived intangible asset impairment charge of $6 million for the three months ended March 31, 2024. A reconciliation of changes in the Company’s goodwill by reportable segment were as follows:
(in millions) |  |  |  |  |  | Connected Technology Solutions |  | Essential Dental Solutions |  | Orthodontic and Implant Solutions |  | Wellspect Healthcare |  | Total
Balance at December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  |  |  |  |  | $ | 291 |  |  | $ | 840 |  |  | $ | 1,323 |  |  | $ | 275 |  |  | $ | 2,729 |
Accumulated impairment losses (a) |  |  |  |  |  | (291) |  |  | — |  |  | — |  |  | — |  |  | (291) |
Goodwill, net at December 31, 2023 |  |  |  |  |  | — |  |  | 840 |  |  | 1,323 |  |  | 275 |  |  | 2,438 |
Impairment |  |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Foreign Currency Translation |  |  |  |  |  | — |  |  | (8) |  |  | (36) |  |  | (5) |  |  | (49) |
Balance at June 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  |  |  |  |  | $ | 291 |  |  | $ | 832 |  |  | $ | 1,287 |  |  | $ | 270 |  |  | $ | 2,389 |
Accumulated impairment losses (a) |  |  |  |  |  | $ | (291) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Goodwill, net at June 30, 2024 |  |  |  |  |  | $ | — |  |  | $ | 832 |  |  | $ | 1,287 |  |  | $ | 270 |  |  | $ | 2,389 |
(a) The Company realigned segments in 2023, and at that time, there was an accumulated impairment loss that was not allocated to the new segments. Identifiable definite-lived and indefinite-lived intangible assets were as follows:
|  | June 30, 2024 |  | December 31, 2023
(in millions) |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Developed technology and patents |  | $ | 1,659 |  |  | $ | (1,043) |  |  | $ | 616 |  |  | $ | 1,697 |  |  | $ | (1,006) |  |  | $ | 691 |
Trade names and trademarks |  | 270 |  |  | (107) |  |  | 163 |  |  | 271 |  |  | (102) |  |  | 169 |
Licensing agreements |  | 30 |  |  | (28) |  |  | 2 |  |  | 30 |  |  | (27) |  |  | 3 |
Customer relationships |  | 1,044 |  |  | (698) |  |  | 346 |  |  | 1,070 |  |  | (680) |  |  | 390 |
Total definite-lived |  | 3,003 |  |  | (1,876) |  |  | 1,127 |  |  | 3,068 |  |  | (1,815) |  |  | 1,253 |
Indefinite-lived trade names and trademarks |  | 427 |  |  | — |  |  | 427 |  |  | 447 |  |  | — |  |  | 447 |
In-process R&D (a) |  | 5 |  |  | — |  |  | 5 |  |  | 5 |  |  | — |  |  | 5 |
Total indefinite-lived |  | 432 |  |  | — |  |  | 432 |  |  | 452 |  |  | — |  |  | 452 |
Total identifiable intangible assets |  | $ | 3,435 |  |  | $ | (1,876) |  |  | $ | 1,559 |  |  | $ | 3,520 |  |  | $ | (1,815) |  |  | $ | 1,705 |
(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. In 2021, the Company purchased certain developed technology rights for an initial payment of $3 million and minimum guaranteed contingent payments of $17 million to be made upon reaching certain regulatory and commercial milestones. The contingent payments are not considered probable as of June 30, 2024.

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- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 350 -SubTopic 30 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/350-30/tableOfContent Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 350 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/350-20/tableOfContent + Details
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