Company: KHC
Filing Date: 2025-07-30
Form Type: 10-Q
Source: 0001637459-25-000152
Chunk: 187

Company: Kraft Heinz Co
Filing Date: 2025-07-30
Form: 10-Q
Item: Part I, Item 2
Chunk 187
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 with the future earnings attributable to the brand, and management’s intent to invest in the brand indefinitely. We select the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, management’s plans, and a consideration of market multiples of certain peer and guideline companies. We incorporated the market’s perceived risks in our ability to achieve our future cash flows through the discount rate resulting in higher discount rates than those we’ve historically utilized.

We utilize the relief from royalty method under the income approach to estimate the fair value of our remaining brands. Some of the more significant assumptions inherent in estimating the fair values include the estimated future annual sales for each brand, royalty rates (as a percentage of net sales that would hypothetically be charged by a licensor of the brand to an unrelated licensee), income tax considerations, long-term growth rates, a discount rate that reflects the level of risk associated with the future cost savings attributable to the brand, and management’s intent to invest in the brand indefinitely. We select the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, management’s plans, and a consideration of market multiples of certain peer and guideline companies. We incorporated the market’s perceived risks in our ability to achieve our future cash flows through the discount rate resulting in higher discount rates than those we’ve historically utilized.

The discount rates, long-term growth rates, and royalty rates used to estimate the fair values of our reporting units and our brands with 20% or less excess fair value over carrying amount, as well as the goodwill or brand carrying amounts, as of the Q2 Impairment Test for each reporting unit and brand were as follows:

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Goodwill Carrying Amount(in billions)Discount RateLong-Term Growth RateRoyalty RateMinimumMaximumMinimumMaximumMinimumMaximumReporting units$21.9 8.8 %11.5 %— %2.0 %Brands(excess earnings method)13.1 9.8 %14.8 %0.1 %1.6 %Brands(relief from royalty method)4.5 10.0 %16.5 %0.5 %2.0 %4.0 %20.0 %

Assumptions used in impairment testing are made at a point in time and require significant judgment; therefore, they are subject to change based on the facts and circumstances present at each annual and interim impairment