Company: PRGO
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0001585364-25-000014
Chunk: 30

Company: PERRIGO Co plc
Filing Date: 2025-02-28
Form: 10-K
Item: Item 7
Chunk 30
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 of changes in these assumptions to the related estimate of fair value. The discount 

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Perrigo Company plc - Item 7Critical Accounting Estimates

rates used in testing each of our reporting units’ goodwill for impairment during our testing were based on the weighted average cost of capital determined for each of our reporting units. In our annual impairment test as of September 29, 2024, discount rates ranged from 10.00% to 11.25%, and perpetual growth rates were 2.50%. In our annual impairment test as of October 1, 2023, discount rates ranged from 10.75% to 12.00%, and perpetual growth rates were 2.50%. 

The cash flow forecasts used for our reporting units include assumptions about future activity levels in the near term and longer-term. If growth in our reporting units is lower than expected, we may experience deterioration in our cash flow forecasts that may indicate goodwill in one or more reporting units is impaired in future impairment tests. An increase in the discount rate could negatively impact the estimated fair value of the reporting units and lead to future impairment. Furthermore, our estimates of fair value give consideration to the level of implied control premium, which is the amount a buyer is willing to pay over the current market price of a company (i.e. market capitalization) to acquire a controlling interest. We may experience a sustained decrease in our market capitalization which could imply an impairment of one or more of our reporting units. 

We performed sensitivity analyses on the discounted cash flow valuations that were prepared to estimate the fair value of each reporting unit. Discount rates and perpetual revenue growth rates were increased and decreased by increments of 25 or 50 basis points. For the CSCI reporting unit, the fair value exceeded our carrying amount by less than 10% as of the annual testing date. Therefore, a 75 basis point increase in the discount rate, or a 50 basis point increase in the discount rate combined with a 25 basis point decrease in the perpetual growth rate, would indicate potential impairment for this reporting unit. For the CSCA reporting unit, the fair value exceeded our carrying amount by less than 20% as of the annual testing date. A 125 basis point increase in the discount rate, or a 100 basis point increase in the discount rate combined with a 125 basis point decrease in the perpetual growth rate, would indicate potential impairment for this reporting unit. Both the CSCI and CSCA reporting unit's fair value includes material benefits from our