Company: NGVT
Filing Date: 2025-02-19
Form Type: 10-K
Source: 0001653477-25-000015
Chunk: 208

Company: Ingevity Corp
Filing Date: 2025-02-19
Form: 10-K
Item: Item 5
Chunk 208
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, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Annual Goodwill Impairment Assessment – Advanced Polymer Technologies Reporting Unit 

As described in Notes 2 and 8 to the consolidated financial statements, the Company’s consolidated goodwill balance was $175.2 million as of December 31, 2024, of which $170.9 million relates to the Advanced Polymer Technologies reporting unit. Management conducts an annual review of goodwill for potential impairment at October 1, or sooner if events or changes in circumstances indicate that the fair value of a reporting unit is below its carrying value. The fair value of the reporting unit was determined by management using both the income approach and market approach. The income approach determines fair value based on a discounted cash flow model derived from a reporting unit’s long-term forecasted cash flows, and the market approach determines fair value based on the application of earnings multiples of comparable companies to projected earnings of the reporting unit. The amount of impairment loss is measured as the difference between the carrying value and the fair value of a reporting unit but is limited to the total amount of goodwill allocated to a reporting unit. The calculated estimated fair value of the reporting unit reflects a number of significant management assumptions and estimates including forecasted revenue growth rates, forecasted Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) margins, and discount rate. Management concluded that there was no impairment for the year ended December 31, 2024. 

The principal considerations for our determination that performing procedures relating to the annual goodwill impairment assessment of the Advanced Polymer Technologies reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to forecasted revenue growth rates, forecasted EBITDA margins, and discount rate used in the discounted cash flow model; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

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 of controls relating to management’s annual goodwill impairment assessment, including controls over the valuation of the Advanced Polymer Technologies reporting unit. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the reporting unit; (ii)