Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Note 2—Goodwill and Other Intangible Assets

Goodwill and other intangible assets consisted of the following:


	As of December 31,
	2024		2023
	(Dollars in millions)
Goodwill, less accumulated impairment losses of $2,405 and $2,405	$	6,955	6,955
Other intangible assets, less accumulated amortization of $1,841 and $1,966	$	84	103

As of December 31, 2024 and 2023, the gross carrying amount of goodwill and other intangible assets was $8.9 billion and $9.0 billion, respectively.

Substantially all of our goodwill was derived from Lumen's acquisition of us where the purchase price exceeded the fair value of the net assets acquired.

We are required to assess our goodwill for impairment annually, or under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment. We are required to write down the value of goodwill only when our assessment determines the carrying value of equity of our reporting unit exceeds its fair value. Our annual impairment assessment date for goodwill is October 31, at which date we assess goodwill at our reporting unit. In reviewing the criteria for reporting units, we have determined that we are one reporting unit.

2024 Goodwill Impairment Analysis

As of October 31, 2024, we performed our annual impairment analysis of the goodwill of our one above-mentioned reporting unit by using a qualitative assessment to determine whether it was more likely than not that the fair value of the reporting unit was less than its carrying value. Factors considered in the qualitative assessment included, among other things, macroeconomic conditions, industry and market conditions, financial performance of the reporting unit and other relevant reporting unit considerations. We concluded the estimated fair value of our reporting unit was greater than our carrying value of equity as of our testing date. Therefore, we concluded no impairment existed as of our annual assessment date in the fourth quarter of 2024.

2023 Goodwill Impairment Analyses

As of October 31, 2023, we performed our annual impairment analysis of our reporting unit. Given the continued decline in Lumen's share price, we determined our quantitative impairment analysis would estimate the fair value of our reporting unit using only the market approach. Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry which supported a range of fair values derived from annualized revenue and earnings before interest, tax, depreciation and amortization ("EBITDA") multiples between 1.5x and 3.5x and 4.8x and 8.4x, respectively. We selected a revenue multiple within and an EBITDA multiple below these comparable market multiples. Based on our assessment performed, we concluded that the estimated fair value of our reporting unit was less than their carrying value of equity at October 31, 2023. As a result, we recorded a non-cash, non-tax-deductible goodwill impairment charge of $2.4 billion on October 31, 2023.

During the second quarter of 2023, the Company determined circumstances existed indicating it was more likely than not that the carrying value of our reporting unit exceeded its fair value. Given the continued erosion in Lumen's market capitalization, we determined our quantitative impairment analysis would estimate the fair value of our reporting unit using only the market approach. Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry which supported a range of fair values derived from annualized revenue and EBITDA multiples between 1.5x and 4.3x and 4.6x and 10.5x, respectively. We selected a revenue multiple within and an EBITDA multiple below these comparable market multiples. Based on our assessment performed, the estimated fair value of our equity exceeded our carrying value of equity by approximately 11% at June 30, 2023. We concluded that goodwill was not impaired as of June 30, 2023.

The market approach that we used incorporated estimates and assumptions related to the forecasted results for the remainder of the year, including revenues, expenses, and the achievement of certain strategic initiatives. In developing the market multiples, we considered observed trends of our industry participants. Our assessment included many factors that required significant judgment. Alternative interpretations of these factors could have resulted in different conclusions.

2022 Goodwill Impairment Analysis

At October 31, 2022, we estimated the fair value of equity by considering both a market approach and a discounted cash flow method. The market approach method includes the use of comparable multiples of publicly traded companies whose services are comparable to ours. The discounted cash flow method is based on the present value of projected cash flows and a terminal value, equal to the present value of all normalized cash flows after the projection period. Based on our assessment performed, the estimated fair value of our equity exceeded our carrying value of equity by approximately 24% at October 31, 2022. We concluded that goodwill was not impaired as of October 31, 2022.

Our fair value estimates for evaluating goodwill incorporated significant judgments and assumptions including forecast revenues and expenses, cost of capital, and control premiums. In developing market multiples, we also considered observed trends of our industry participants and other qualitative factors that required significant judgment. Alternative estimates, judgments, and interpretations of these factors could have resulted in different conclusions regarding the need for an impairment charge.

The following table shows the rollforward of goodwill from December 31, 2022 through December 31, 2024:


	(Dollars in millions)
As of December 31, 2022	$	9,360
Impairment	(2,405)
As of December 31, 2023(1)	6,955
As of December 31, 2024(1)	$	6,955

______________________________________________________________________

(1)Goodwill at December 31, 2024 and December 31, 2023 is net of accumulated impairment losses of $2.4 billion.

We annually review the estimated lives and methods used to amortize our other intangible assets. The actual amounts of amortization expense may differ materially from our estimates, depending on the results of our annual reviews. As of December 31, 2024, the weighted average remaining useful life was three years for capitalized software.

Total amortization expense for intangible assets for the years ended December 31, 2024, 2023 and 2022 was $41 million, $67 million and $79 million, respectively.

We estimate that future total amortization expense for finite-lived intangible assets will be as follows:


	(Dollars in millions)
2025	$	27
2026	17
2027	13
2028	10
2029	6
2030 and thereafter	11
Total finite-lived intangible assets future amortization expense	$	84