Company: OFIX
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0000950170-25-026066
Chunk: 156

Company: Orthofix Medical Inc.
Filing Date: 2025-02-25
Form: 10-K
Item: Item 1A
Chunk 156
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 deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years, or 15 years for such expenditures incurred outside of the U.S. This requirement may have a significant impact on our cash tax liability and our effective tax rate as we perform research and development in the U.S., Italy, and Canada. 

Certain of our subsidiaries sell products directly to other Orthofix subsidiaries or provide marketing and support services to other Orthofix subsidiaries. These intercompany sales and support services involve subsidiaries operating in jurisdictions with differing tax rates and we must determine the appropriate allocation of income to each jurisdiction based on current interpretations of complex income tax regulations. Tax authorities in these jurisdictions may challenge our treatment of such intercompany transactions. If we are unsuccessful in defending our treatment of intercompany transactions, we may be subject to additional tax liability, interest, or penalty, which could adversely affect our profitability and operating cash flow. 

Our goodwill, intangible assets, and fixed assets are subject to potential impairment; we have recorded significant goodwill impairment charges in the past and may be required to record additional charges to future earnings if our remaining goodwill or intangible assets become impaired.

A significant portion of our assets consists of goodwill, intangible assets, and fixed assets. The carrying value of these assets may be reduced if we determine that those assets are impaired, including intangible assets from recent acquisitions. 

Goodwill is required to be tested for impairment at least annually. We review our two reporting units for potential goodwill impairment in the fourth fiscal quarter of each year as part of our annual goodwill impairment testing, and more often if an event or circumstance occurs making it likely that impairment exists. If actual results differ from the assumptions and estimates used in the goodwill and intangible asset calculations, we could incur future impairment or amortization charges, which could negatively impact our financial condition and results of operations.

Most of our intangible and fixed assets have finite useful lives and are amortized or depreciated over their useful lives on a straight-line basis. The underlying assumptions regarding the estimated useful lives of these intangible assets are analyzed on at least an annual basis and more often if an event or circumstance occurs making it likely that the carrying value of the assets may not be recoverable. Any such changes are reflected through accelerated amortization, if necessary. Whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable, we test intangible assets for impairment based on estimates of future cash flows. Examples of such an event or change in circumstances include a