Company: KEY-PI
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000091576-25-000038
Chunk: 39

Company: KEYCORP /NEW/
Filing Date: 2025-02-21
Form: 10-K
Item: Item 8
Chunk 39
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). Further, we performed an independent search for the existence of new or contrary information relating to risks impacting the qualitative factor adjustments to validate that management’s considerations are appropriate.  Additionally, we evaluated whether the overall ALLL, inclusive of qualitative factor adjustments, reasonably reflects losses expected in the loan and lease portfolio by comparing to peer bank data and KeyCorp’s actual historical loss data.

103

Goodwill Impairment Test of the Institutional Bank Reporting UnitDescription of the MatterKeyCorp has a goodwill balance of $2.8 billion as of December 31, 2024, of which $715 million is allocated to the Institutional Bank reporting unit. As discussed in Notes 1 and 12 of the financial statements, management performs an annual goodwill impairment test at the reporting unit level as of October 1, or more frequently as events occur or circumstances change that may indicate that it is more likely than not that the fair value of any reporting unit may be less than its carrying value. Effective in the first quarter of 2024, management realigned KeyCorp’s real estate capital business from the Commercial Bank reporting unit to the Institutional Bank reporting unit. The realignment was identified as a triggering event for purposes of performing an interim quantitative goodwill impairment test immediately before and immediately after the realignment. Management estimates the fair value of its reporting units by using a combination of income and market approaches. The income approach consists of discounted cash flow modeling that uses internal forecasts and various other inputs and assumptions. The market approach incorporates comparable public company multiples along with data related to recent merger and acquisition activity.  Auditing management's interim quantitative goodwill impairment test, for the Institutional Bank reporting unit, immediately before the realignment, was complex and highly judgmental due to the significant estimation required to determine the fair value of the reporting unit as of the interim measurement date. In particular, the fair value estimate was sensitive to certain assumptions, which includes the internal forecast and discount rate utilized in the discounted cash flow method of the income approach. How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over KeyCorp’s goodwill impairment review process, including controls over management’s review of the significant assumptions described above.  To test management’s interim quantitative goodwill impairment test for the Institutional Bank reporting unit, we evaluated certain assumptions of the internal forecast utilized by management in the discounted cash flow method of the income approach with historical performance (e.g., trend analysis), current industry and economic trends, and changes in KeyCorp’s strategies. We evaluated the consistency