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Goodwill | 12 Months Ended
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Dec. 31, 2023
Goodwill | NOTE 7 – Goodwill: Changes in the carrying amount of goodwill for the years ended December 31, 2023 and 2022 were as follows:
|  |  |  |  |  |  |  |  |  |  | Other |  |  |  |
|  | North America |  |  | Europe |  |  | International Markets |  |  | Teva’s API |  |  | Medis |  |  | Total |
|  | (U.S. $ in millions) |  |  |  |
Balance as of December 31, 2021 (1) |  | $ | 6,474 |  |  | $ | 8,544 |  |  | $ | 2,328 |  |  | $ | 2,417 |  |  | $ | 277 |  |  | $ | 20,040 |
Changes during the period: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill impairment |  |  | — |  |  |  | — |  |  |  | (979 | ) |  |  | (1,066 | ) |  |  | — |  |  |  | (2,045 | )
Goodwill acquired |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 12 |  |  |  | — |  |  |  | 12 |
Translation differences |  |  | (24 | ) |  |  | (242 | ) |  |  | (10 | ) |  |  | (70 | ) |  |  | (28 | ) |  |  | (374 | )
Balance as of December 31, 2022 (1) |  | $ | 6,450 |  |  | $ | 8,302 |  |  | $ | 1,339 |  |  | $ | 1,293 |  |  | $ | 249 |  |  | $ | 17,633 |
Changes during the period: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill impairment |  |  | — |  |  |  | — |  |  |  | (700 | ) |  |  | — |  |  |  | — |  |  |  | (700 | )
Goodwill reclassified as assets held for sale |  |  | — |  |  |  | — |  |  |  | (30 | ) |  |  | — |  |  |  | — |  |  |  | (30 | )
Translation differences |  |  | 9 |  |  |  | 164 |  |  |  | 66 |  |  |  | 20 |  |  |  | 16 |  |  |  | 275 |
Balance as of December 31, 2023 (1) |  | $ | 6,459 |  |  | $ | 8,466 |  |  | $ | 675 |  |  | $ | 1,313 |  |  | $ | 265 |  |  | $ | 17,177 |
(1) | Cumulative goodwill impairment as of December 31, 2023, December 31, 2022 and December 31, 2021 was approximately $28.3 billion, $27.6 billion and $25.6 billion respectively.
Teva operates its business through three reporting segments: North America, Europe and International Markets. Each of these business segments is a reporting unit. Additional reporting units include Teva’s production and sale of APIs to third parties (“Teva API”) and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through its affiliate Medis. Teva’s API and Medis reporting units are included under “Other” in the table above. See note 19 for additional segment information. 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 begins 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. First Quarter Developments During the first quarter of 2023, management evaluated whether there were any developments that occurred during the quarter to determine if it was more likely than not that the fair value of any of its reporting units was below its carrying amount as of March 31, 2023. Management concluded that no triggering event had occurred and, therefore, no quantitative assessment was performed. Following the goodwill impairment charges recorded in the fourth quarter of 2022 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 December 31, 2022. Additionally, as part of the quantitative analysis Teva conducted as part of its annual goodwill impairment test in the second quarter of 2022, it concluded that the estimated fair value of Teva’s Europe reporting unit exceeded its estimated carrying amount by 9%. Second Quarter Developments Pursuant to Company policy, Teva conducted the annual goodwill impairment test for all reporting units during the second quarter of 2023. Management considered all information available, including information gathered from its latest long-range planning (“LRP”) process and annual operating plan (“AOP”), which are parts of Teva’s internal financial planning and budgeting processes, as well as Teva’s newly launched “Pivot to Growth” strategy. The LRP, the AOP and Teva’s Pivot to Growth strategy were 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. Based on this quantitative analysis, in the second quarter of 2023, Teva recorded a goodwill impairment charge of $700 million related to its International Markets reporting unit, mainly due to an increase in the discount rate due to higher risk associated with country-specific characteristics of several countries. Following the goodwill impairment charge recorded in relation to Teva’s International Markets reporting unit, the carrying value of this reporting unit equaled its fair value as of June 30, 2023. Therefore, if business conditions or expectations were to change materially, it may be necessary to record further impairment charges to Teva’s International Markets reporting unit in the future. The excess of the estimated fair value of Teva’s API reporting unit over its estimated carrying amount as of June 30, 2023, was negligible. Therefore, if business conditions or expectations were to change materially, it may be necessary to record impairment charges to Teva’s API reporting unit in the future. The estimated fair value of Teva’s Europe reporting unit exceeds its estimated carrying amount by 3% based on a terminal growth rate of 1.56% and a discount rate of 9.96%. If Teva holds all other assumptions constant, a reduction in the terminal growth rate of 0.25% to 1.31% or an increase in the discount rate of 0.25% to 10.21% would result in a reduction of the excess of fair value over carrying amount with respect to Teva’s Europe reporting unit to 1%. Teva’s North America and Medis reporting units have fair values in excess of 10% over their respective book values as of June 30, 2023. 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, 2023, the Company’s market capitalization plus a reasonable control premium exceeded its book value. Third Quarter Developments During the third quarter of 2023, management evaluated whether there were any developments that occurred during the quarter to determine if it was more likely than not that the fair value of any of its reporting units was below its carrying amount as of September 30, 2023. Management concluded that no triggering event had occurred and, therefore, no quantitative assessment was performed. Fourth Quarter Developments During the fourth quarter of 2023, Teva completed its AOP process. The AOP was used as a base for an update of the LRP and Teva’s Pivot to Growth strategy, incorporating the changes for future years in the fair value model. Additionally, management evaluated whether there were any 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 as of December 31, 2023. Management noted the following main triggering events during the fourth quarter for its International Markets reporting unit and its Teva’s API reporting unit: (i) fluctuations in exchange rates between certain currencies in which Teva operates in its International Markets reporting unit, and the U.S. dollar, are expected to significantly lower projected operating results; and (ii) updated assumptions supporting the cash flow projections of Teva’s API reporting unit, including certain revenue growth assumptions, and the associated operating profit margins, mainly resulting from changes in market conditions. Management performed a quantitative assessment in the fourth quarter of 2023, which resulted in no recognition of a goodwill impairment. Following the quantitative assessment performed in relation to Teva’s International Markets reporting unit, the excess of its estimated fair value over its estimated carrying amount as of December 31, 2023, was 6%, based on a terminal growth rate of 1.79% and a discount rate of 12.23%. If Teva holds all other assumptions constant, a reduction in the terminal growth rate of 0.25% to 1.54% or an increase in the discount rate of 0.25% to 12.48% would result in a reduction of the excess of fair value over carrying amount with respect to Teva’s International Markets reporting unit to 4%. Following the quantitative assessment performed in relation to Teva’s API reporting unit, the excess of its estimated fair value over its estimated carrying amount as of December 31, 2023, was negligible. Therefore, if business conditions or expectations (such as growth rate or discount rate) were to adversely change, it may be necessary to record impairment charges to Teva’s API reporting unit in the future. With respect to the remaining reporting units, 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 December 31, 2023 and, therefore, no quantitative assessment was performed.

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