Company: KHC
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001637459-25-000011
Chunk: 130

Company: Kraft Heinz Co
Filing Date: 2025-02-13
Form: 10-K
Item: Item 8
Chunk 130
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 amount of a brand exceeds its estimated fair value, an impairment loss is recorded based on the difference between the fair value and carrying amount. As a result of its annual impairment test, management recognized non-cash indefinite-lived intangible asset impairment losses of $0.6 billion for the year ended December 28, 2024. As disclosed by management, management utilizes either an excess earnings method or relief from royalty method to estimate the fair value of its brands. Using the excess earnings method, management’s cash flow projections included significant 

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assumptions relating to net sales, cost of products sold, SG&A, contributory asset charges, income tax considerations, long-term growth rates, discount rates, and other market factors. Using the relief from royalty method, management’s cash flow projections included significant assumptions related to net sales, royalty rates, income tax considerations, long-term growth rates, discount rates, and other market factors.

The principal considerations for our determination that performing procedures relating to the annual indefinite-lived intangible impairment assessments (for Kraft, Velveeta, Oscar Mayer, and Lunchables) is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the brands; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to (a) net sales, cost of products sold, SG&A, and long-term growth rates, as applicable to the brand, for the excess earnings method and (b) net sales and royalty rates, as applicable to the brand, for the relief from royalty method; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s indefinite-lived intangible assets impairment assessment, including controls over the valuation of the Kraft, Velveeta, Oscar Mayer, and Lunchables brands. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the brands; (ii) evaluating the appropriateness of the excess earnings and relief from royalty methods used by management; (iii) testing the completeness and accuracy of underlying data used in the methods; and (iv) evaluating the reasonableness of the significant assumptions used by management related to (a) net sales, cost of products sold, SG&A, and long-term growth rates, as applicable to the brand,