The changes in the carrying amount of goodwill for the nine months ended September 30, 2022 were as follows:


	North America			Europe			International Markets			Other			Total

	(U.S. $ in millions)
Balance as of December 31, 2021 (1)	$	6,474		$	8,544		$	2,328		$	2,694		$	20,040
Changes during the period:
Goodwill impairment		—			—			(479	)		(266	)		(745	)
Goodwill acquired											12			12
Translation differences		(27	)		(559	)		(67	)		(221	)		(874	)

Balance as of September 30, 2022 (1)	$	6,447		$	7,985		$	1,782		$	2,219		$	18,433

(1)	Accumulated goodwill impairment as of September 30, 2022 and December 31, 2021 was approximately $26.3 billion and $25.6 billion, respectively.

Teva determines the fair value of its reporting units using the income approach. The income approach is a forward-looking approach for estimating fair value. Within the income approach, the method used is the discounted cash flow method. Teva starts with a forecast of all the expected net cash flows associated with the reporting unit, which includes the application of a terminal value, and then applies a discount rate to arrive at a net present value amount. Cash flow projections are based on Teva’s estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used is based on the weighted average cost of capital (“WACC”), adjusted for the relevant risk associated with country-specific and business-specific characteristics. If any of these expectations were to vary materially from Teva’s assumptions, Teva may record an impairment of goodwill allocated to these reporting units in the future.

During the second quarter of 2022, Teva completed its long-range planning (“LRP”) process. The LRP is part of Teva’s internal financial planning and budgeting processes and is discussed and reviewed by Teva’s management and its board of directors.

Additionally, Teva conducted a quantitative analysis of all reporting units as part of its annual goodwill impairment test with the assistance of an independent valuation

expert.

Teva identified an increase in certain components of the discount rate, mainly attributable to: (i) the risk free interest rate, which resulted in an increase in the WACC; and (ii) the risk associated with country-specific characteristics of several countries.

Based on this quantitative analysis, in the second quarter of 2022, Teva recorded a goodwill impairment charge of $745 million as follows: (i) $479 million related to its International Markets reporting unit, mainly due to the increase in the discount rate; and (ii) $266 million related to its Teva’s API reporting unit, mainly due to the increase in the discount rate, as well as updated assumptions supporting the cash flow projections, including certain revenue growth assumptions and the associated operating profit margins. Teva’s API reporting unit is included under “Other” in the table above.

Following the goodwill impairment charges recorded in relation to Teva’s International Markets and Teva’s API reporting units, the carrying values of those reporting units equaled their fair value as of June 30, 2022. Therefore, if business conditions or expectations were to change materially, it may be necessary to record further impairment charges to Teva’s International Markets or Teva’s API reporting units in the future.

The estimated fair value of Teva’s Europe reporting unit exceed

its estimated carrying amount by 9% based on a terminal growth rate of 1.41% and a discount rate of 10.04%. If Teva h

eld

all other assumptions constant, a reduction in the terminal growth rate of 0.50% to 0.91% or an increase in the discount rate of 0.50% to 10.54%

would

have

res

lted

in a reduction of the excess of fair value over carrying amount with respect to Teva’s Europe reporting unit to 5%.

Teva’s North America and Medis reporting units ha

a fair value in excess of 10% over their book values as of June 30, 2022.

Teva noted its

market capitalization has been below management’s assessment of the aggregated fair value of the Company’s reporting units. However, as of June 30, 2022, the Company’s market capitalization plus a reasonable control premium exceeded its book value.

During the third quarter of 2022, management assessed developments that occurred during the quarter to determine if it is more likely than not that the fair value of any of its reporting units was below its carrying amount. Based on this assessment, management concluded that it was not more likely than not that the fair value of any of the reporting units was below its carrying amounts as of September 30, 2022 and, therefore, no quantitative assessment was performed.