Goodwill and impairment: what a write-down means

What is goodwill?

When one company buys another, it often pays more than the value of the assets it can list one by one. That extra is goodwill.

CVS Health's 10-K describes it as the excess of the amount paid over the net identifiable assets acquired, measured at fair value.[S3]

"Fair value" is roughly what an item would sell for. "Net identifiable assets" means things like buildings, cash, contracts and patents, minus the debts taken on.

Goodwill then sits on the buyer's balance sheet as an asset, on its own line.[S3]

Why is goodwill not spread out over time?

Many long-lived assets are expensed bit by bit over the years they are used. The SEC's guide calls this depreciation or amortization.[S2]

US accounting rules treat goodwill differently. For public companies, it is not amortized at all. Instead, it is tested for impairment at least once a year.[S1]

"Impairment" means the asset is now carried at more than it is worth. The test is run for each reporting unit, a part of the company that the rules test on its own.[S1]

The yearly test may fall on any date, but on the same date every year. Different units may be tested at different times.[S1]

What can trigger a test between the yearly ones?

A company must also test between yearly tests when something happens that makes a shortfall more likely than not. That means a unit's fair value is now probably below its carrying amount (its value on the books).[S1]

The rule lists examples of such events and circumstances:[S1]

• Worse economic conditions, or harder access to borrowing.
• More competition, or a change in the market for the company's products.
• Rising costs that cut into earnings and cash flows.
• Falling cash flows, or revenue or earnings below plans.
• Changes in management, strategy or key customers, or litigation.
• A sustained decrease in the company's share price.

A company may first weigh such factors in words, a "qualitative" check. "More likely than not" means a likelihood of more than 50 percent.[S1]

How is the write-down measured?

The company compares the reporting unit's fair value with its carrying amount, including goodwill. If the carrying amount is higher, the gap is the impairment loss.[S1]

The loss cannot be larger than the goodwill allocated to that unit.[S1]

This one-step test comes from the FASB's Accounting Standards Update 2017-04. It removed an older second step that estimated an "implied fair value" for goodwill alone. The FASB said that should reduce cost and complexity.[S1]

SEC filers other than smaller reporting companies had to apply it from fiscal years beginning after Dec 15, 2019. A later update, ASU 2019-10, moved smaller reporting companies and other entities to fiscal years beginning after Dec 15, 2022.[S4]

Once recorded, the write-down is permanent. The lower figure becomes the new basis, and reversing the loss later is not allowed.[S1]

Where does a write-down show up in a 10-K?

CVS Health's 10-K for fiscal year 2025, filed Feb 10, 2026, shows one in three places.[S3]

The SEC's guide explains that the cash flow statement adjusts net income for non-cash items, such as depreciation.[S2]

What does the 10-K say about why it happened?

The charge related to the Health Care Delivery reporting unit, within the Health Services segment.[S3]

CVS Health said its new management team decided to open fewer new primary care clinics and to close some existing ones. It updated its projections, and ran an extra test in the third quarter of 2025.[S3]

That test found the unit's fair value below its carrying value. The 10-K says lower market multiples of peer companies also added to the charge.[S3]

Fair value here is an estimate. CVS Health combined a discounted cash flow method with a market multiple method.[S3]

A discounted cash flow method turns forecast future cash into a value today. A market multiple method compares the unit with prices of similar companies.

The 10-K lists the assumptions involved. They include discount rates, terminal (long-run) growth rates, and forecasts of revenue, operating income and capital spending.[S3]

How do adjusted figures treat it?

Companies may show their own "adjusted" figures beside the official GAAP ones. CVS Health's adjusted operating income for FY2025 left out the $5,725 million charge.[S3]

The 10-K also says the charge was not deductible for income tax purposes.[S3]

To see how adjusted figures are built and reconciled, read what non-GAAP measures leave out.

Where can you see this on Cityfort?

The CVS Health page lists the goodwill impairment as a separate, non-cash line in its $100 receipt.

The Verizon, Caterpillar, AT&T and Sandisk pages also mention goodwill write-downs in past years. Each points to the filing it came from.