Company: STGW
Filing Date: 2025-03-11
Form Type: 10-K
Source: 0000876883-25-000009
Chunk: 94

Company: Stagwell Inc
Filing Date: 2025-03-11
Form: 10-K
Item: Item 8
Chunk 94
---
, 2024, and the goodwill associated with the Integrated Agencies Network segment, the Communications Network segment, and the All Other category was $892 million, $159 million, and $69 million, respectively. Management tests goodwill for impairment, at the reporting unit level, annually as of October 1 of each year, or more frequently if indicators of potential impairment exist. For reporting units for which the qualitative assessment concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, management performs a quantitative impairment test, which compares the fair value of the reporting unit to its carrying amount. If the fair value of the reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not considered impaired. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. Management uses a combination of the income approach (a discounted cash flow method) and the market approach, and applies an equal weighting to the approaches for the impairment test. The income approach requires the exercise of significant judgment, including the amount and timing of expected future cash flows, terminal value and discount rates. The expected cash flows are developed from the Company’s long-range planning process using projections of operating results and related cash flows based on assumed revenue growth rates, EBITDA margin, long-term growth rates, and discount rates based on a reporting unit’s weighted average cost of capital. The market approach requires the exercise of significant judgment as it relates to the use of earnings multiples based on market data and comparable companies.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments for certain reporting units in the Integrated Agencies Network and Communications Network segments and the All Other category (collectively the “aforementioned reporting units”) is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the aforementioned reporting units; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, EBITDA margin, long-term growth rates, and discount rates used in the income approach, as well as earnings multiples and comparable companies used in the market approach; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. As previously disclosed by management, material weaknesses existed during the year that impacted this matter. 

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