Published: October 27, 2026

By Nir Dukas, founder of SeeNote.

How do you read the goodwill impairment note?

Read the goodwill rollforward by segment first, then the narrative on which reporting unit was tested, why, and how fair value was estimated, then the assumptions and the auditor's critical audit matter. Since ASU 2017-04, any charge equals the amount by which a unit's carrying amount exceeds its fair value, capped at its goodwill.

A goodwill charge moves no cash, but it is a company's own admission that a business it bought is worth less than its carrying amount. The note that explains the charge is usually one table and a few dense paragraphs, and the useful information is in specific sentences: the trigger, the reporting unit, the cushion left on the units that passed, and the assumptions.

What does ASC 350-20 require companies to test?

US GAAP tests goodwill at the level of the reporting unit, which ASC 350-20-35-33 defines as "an operating segment or one level below an operating segment (also known as a component)." A component is its own reporting unit when it is a business with discrete financial information that segment management regularly reviews, and similar components are combined into one. The boundaries of the test therefore come from the same management structure that defines the segments, which matters when you read the two notes together.

Goodwill is tested at least once a year, and in between whenever events or circumstances indicate it might be impaired. A company may start with a qualitative look. Under ASC 350-20-35-3A it asks whether it is "more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill." If the answer is no, the work stops there. If the answer is yes, or if the company skips the qualitative step, which ASC 350-20-35-3B allows "for any reporting unit in any period," it runs the quantitative test.

Intel's 10-K for 2024 shows the screen doing its job. Note 11 says the company's "quarterly qualitative impairment assessment for the third quarter of 2024 indicated that a more detailed quantitative analysis was necessary for certain of our reporting units, primarily due to the decline in our market capitalization below the carrying value of our net assets." The quantitative test that followed produced a $2.8 billion charge, "most of which related to our Mobileye reporting unit."

How does the one-step test work after ASU 2017-04?

Before 2017, failing the first comparison sent a company to a second step, which "compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill." FASB's ASU 2017-04, issued in January 2017, "eliminated Step 2 from the goodwill impairment test." One comparison remains:

"An entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit."

SEC filers other than smaller reporting companies applied the change to fiscal years beginning after December 15, 2019. The later date set for everyone else has also passed. A goodwill charge in a current 10-K is therefore a direct measure of shortfall: carrying amount minus fair value, capped at the unit's goodwill.

That has a consequence for reading. After a write-down that leaves some goodwill in place, the unit's carrying amount equals its estimated fair value at the test date, so there is no cushion left. Walgreens says its VillageMD unit is in that position, and warns: "Future increases in discount rates or deterioration in the observable prices for guideline companies could result in further goodwill impairment in subsequent periods."

What must the goodwill note disclose?

Three requirements shape the note:

• A rollforward. ASC 350-20-50-1 requires the "changes in the carrying amount of goodwill during the period," showing separately the gross amount and accumulated impairment losses at the start and end of the period, goodwill added, impairment losses and other movements. Companies that report segments "shall provide the above information about goodwill in total and for each reportable segment and shall disclose any significant changes in the allocation of goodwill by reportable segment."
• An explanation of each charge. For every impairment loss, ASC 350-20-50-2 lists "A description of the facts and circumstances leading to the impairment" and "The amount of the impairment loss and the method of determining the fair value of the associated reporting unit."
• Its own line in the income statement. ASC 350-20-45-2 requires aggregate goodwill impairment losses to be presented "as a separate line item in the income statement before the subtotal income from continuing operations (or similar caption)," unless they relate to a discontinued operation.

Two other parts of the 10-K carry goodwill detail. In the MD&A, Regulation S-K Item 303(b)(3) requires a discussion of critical accounting estimates, including "why each critical accounting estimate is subject to uncertainty" and "the sensitivity of the reported amount to the methods, assumptions and estimates underlying its calculation." The auditor's report can also name goodwill as a critical audit matter, covered below.

What does a real goodwill impairment note look like?

Walgreens Boots Alliance's 10-K for the fiscal year ended August 31, 2024 reports "Impairment of goodwill" of $12,701 million on its own line in the statement of earnings. Note 6, Goodwill and other intangible assets, explains it. The rollforward by reportable segment comes first:

Source: Walgreens Boots Alliance fiscal 2024 10-K, Note 6, goodwill roll forward. Figures as published, with nil shown as 0; in the filing the segment columns differ from the totals by $1 million to $2 million.

The whole charge sits in U.S. Healthcare, which lost about 80 percent of its goodwill in one year. Note 6 splits it between two reporting units in that segment.

The larger charge came from an interim test: "In the second quarter of fiscal 2024, the Company completed a quantitative impairment analysis for goodwill related to its VillageMD reporting unit within the U.S. Healthcare segment due to downward revisions in its longer term forecast received during the quarter, including the impact of closing approximately 90 additional clinics, slower than expected trends in patient panel growth and multi-specialty productivity trends, and recent changes in Medicare reimbursement models." The charge was $12.4 billion, "prior to attribution of loss to non-controlling interests." The note says it reflects "lower than previously expected longer term financial performance expectations, a reduction in the multiples for publicly traded peer companies, and increases in discount rates." VillageMD was left with $1.5 billion of goodwill and a carrying value that "approximates its fair value."

The smaller charge came from the annual test in the fourth quarter: $332 million for the CareCentrix reporting unit, "due to downward revisions to its longer term forecasts received during the fourth quarter," leaving $178 million of goodwill.

Then comes the sentence most worth rereading, about the units that passed: "Based on the analysis completed as of the June 1, 2024 valuation date, the fair values of the Company's other reporting units exceeded their carrying amounts ranging from approximately 18% to approximately 124%." The note does not say which unit sits at the low end. A similar range covers the indefinite-lived intangibles in the Boots reporting unit, part of the International segment, whose fair values exceeded carrying amounts by "approximately 6% to approximately 73%" on a carrying value of $5.6 billion.

On method, fair value came from "both the income and market approaches." The assumptions are listed as "the selection of appropriate peer group companies, control premiums appropriate for acquisitions in the industries in which the Company competes, discount rates, terminal growth rates, forecasts of revenue, operating income, depreciation, amortization, working capital requirements and capital expenditures." The note gives no value for any of them. Neither Note 6 nor the critical accounting estimates section of the MD&A states the discount rate or terminal growth rate used for goodwill, so you cannot test the 18 percent cushion yourself.

How does the goodwill note connect to the segment note?

Through the reporting units. They are operating segments or components of them, so the rollforward is organized by reportable segment and every charge belongs to one. Three links are worth checking.

First, segment profit may leave the charge out. Walgreens' chief operating decision maker "uses adjusted operating income to assess segment profitability." In Note 16, Segment reporting, U.S. Healthcare shows an adjusted operating loss of $134 million for fiscal 2024. The goodwill charge appears only further down, in the reconciliation to the GAAP operating loss, inside a line titled "Impairment of goodwill, intangibles and long-lived assets" of $13,422 million. Read the segment table alone and you miss the largest item of the year.

Second, a change in segments moves goodwill. Intel's accounting policy note says: "Our reporting units substantially align with our operating segments." When Intel changed its segment reporting in the first quarter of 2024, "we reallocated goodwill among our affected reporting units on a relative fair value basis" and tested each unit before and after the reorganization. The new Intel Foundry unit failed the second test, producing a $222 million charge, and "The Intel Foundry reporting unit has no remaining goodwill." Intel's rollforward in Note 11 has a Transfers column for exactly this kind of movement.

Third, old charges stay on record. Walgreens notes that "prior period goodwill impairment charges of $1.7 billion were recognized in the International Segment." Intel puts its accumulated impairment loss at $3.9 billion at December 28, 2024, of which "$2.6 billion associated with Mobileye."

What does the critical audit matter add?

Under PCAOB AS 3101, a critical audit matter is "Any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex auditor judgment." For each one, the auditor must describe "the principal considerations that led the auditor to determine that the matter is a critical audit matter," explain how it was addressed, and refer to "the relevant financial statement accounts or disclosures."

That last requirement is what makes a CAM useful to a note reader: it points back by number. The CAM from Walgreens' auditor, Deloitte & Touche LLP, is titled "Goodwill and Indefinite-Lived Intangible Assets Impairment VillageMD Reporting Unit and Boots' Pharmacy Licenses Indefinite-lived Intangible Assets" and says "Refer to Notes 1 and 6 to the financial statements." The auditor chose it "due to the materiality of the assets' carrying values, the difference between the fair values and the carrying values of the reporting unit, and because of the continued underperformance compared to historical forecasts at each of the businesses." It names the significant assumptions as "future revenue growth, EBITDA margins, the selection of discount rates, the selection of the valuation approaches, and the market multiples selected." Its procedures included comparing actual results with management's historical forecasts and developing "an independent discount rate range" to set against management's rate.

Read the CAM next to Note 6 and two things stand out. The auditor treats the Boots pharmacy licenses, which never appear in the goodwill rollforward because they are not goodwill, as a judgment area alongside VillageMD. And it names revenue growth and EBITDA margins as significant assumptions, while the note's own list says only "forecasts of revenue, operating income," and so on. Intel's auditor, Ernst & Young LLP, was just as specific about Mobileye: "the fair value estimate was sensitive to significant assumptions such as revenue terminal growth rate and the weighted average cost of capital."

How is IFRS different under IAS 36?

Companies reporting under IFRS test goodwill under IAS 36. The idea is the same, an asset carried at no more than it can recover, but the unit and the yardstick differ.

Sources: ASC 350-20 as reproduced in Deloitte's DART goodwill roadmap; the IFRS Foundation's IAS 36 summary; KPMG, Goodwill impairment: IFRS Accounting Standards vs. US GAAP.

Value in use has no US GAAP counterpart; in KPMG's words, "There is no concept of VIU under US GAAP." Because IAS 36 takes the higher of the two measures, a unit passes if either one covers its carrying amount.

In what order should you read a goodwill note?

The same sequence works on any 10-K:

1. Start with the rollforward. Find the impairment line, the segment column it sits in, and any accumulated impairment losses carried from earlier years.
2. Name the reporting unit. Note which reporting unit was charged, which segment it belongs to, and whether the test was the annual one or triggered by an event.
3. Read the trigger and the method. Look for what changed, such as forecasts, market capitalization or discount rates, and whether fair value came from an income approach, a market approach or both.
4. Check the cushion on the units that passed. A disclosed range such as Walgreens' 18% to 124% tells you how close the surviving units are to a charge.
5. List the assumptions and look for values. Write down the assumptions the note names and check whether it also gives the discount rate or growth rate used.
6. Read the critical audit matter. The auditor's report names the most judgmental assumptions and refers back to the note by number.
7. Follow the charge into other notes. Check the segment reconciliation and the income tax rate reconciliation; Walgreens shows the charge in both.

A test triggered mid-year shows up first in that quarter's 10-Q, whose notes are condensed; our comparison of 10-Q and 10-K notes explains what quarterly notes leave out. For where the goodwill note sits among the others, see how to read 10-K footnotes.

Questions

Reading a goodwill note without losing your place

A goodwill impairment is spread across a 10-K: the statement of earnings, the goodwill note, the segment reconciliation, the tax note, and the auditor's report, which sends you back with "Refer to Notes 1 and 6." SeeNote is a Chrome extension that turns each "see Note 6" style reference on EDGAR into a link that opens the note verbatim in a popup where you are reading, and it follows references from one note to the next. Your first three filings are free, with no card and no expiry; pricing is on seenote.co.