Company: KHC
Filing Date: 2025-10-29
Form Type: 10-Q
Source: 0001637459-25-000166
Chunk: 111

Company: Kraft Heinz Co
Filing Date: 2025-10-29
Form: 10-Q
Item: Part I, Item 8
Chunk 111
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 reporting units as well as the Snacking category of TMS.

12

We performed our 2024 annual impairment test as of June 30, 2024, which was the first day of our third quarter of 2024. We utilized the discounted cash flow method under the income approach to estimate the fair value of our reporting units. As a result of our 2024 annual impairment test, we recognized non-cash goodwill impairment losses in SG&A of approximately $479 million related to our Continental Europe reporting unit within our International Developed Markets segment, $184 million related to our LATAM reporting unit within Emerging Markets, and $44 million related to our AFH reporting unit within our North America segment. The impairment of our Continental Europe reporting unit was primarily driven by a reduction of future year profitability assumptions from prior estimates in non-core categories and the Just Spices business, as well as higher intercompany royalty expenses resulting from a change in our product mix. The impairment of our LATAM reporting unit was primarily driven by a reduction of future year profitability assumptions from prior estimates and negative macroeconomic factors, including weakening of the foreign currency exchange rate of the Brazilian real relative to the U.S. dollar.Additional Goodwill ConsiderationsFollowing the 2025 Annual Impairment Test, our Elevation, HDM, Western Europe, MCCS, and Canada reporting units had less than 5% fair value over carrying amount with an aggregate goodwill carrying amount of $21.9 billion. Our Asia reporting unit had less than 20% fair value over carrying amount with an aggregate goodwill carrying amount of $314 million as of the 2025 Annual Impairment Test date. Accordingly, these reporting units have a heightened risk of future impairments if any assumptions, estimates, or market factors change in the future.Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions, and to consider the market multiples of certain peer and guideline companies. These assumptions and estimates include estimated future annual cash flows (including net sales, cost of products sold, SG&A, depreciation and amortization, working capital, and capital expenditures), income tax rates, discount rates, long-term growth rates, royalty rates, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control change;