Company: CL
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0000021665-25-000008
Chunk: 9

Company: COLGATE PALMOLIVE CO
Filing Date: 2025-02-13
Form: 10-K
Item: Item 16
Chunk 9
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 matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, 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.

Goodwill Impairment Assessment for a Certain Reporting Unit within the North America Oral, Personal and Home Care Segment Prior to the Reporting Structure Realignment

As described in Notes 2, 4 and 13 to the consolidated financial statements, goodwill within the North America Oral, Personal and Home Care segment was $1,108 million as of December 31, 2024, of which a portion relates to a certain reporting unit. Goodwill is subject to an impairment test at least annually or when events or changes in circumstances indicate that an asset may be impaired. In connection with management changes, the Company realigned the reporting structure of its skin health business effective July 1, 2024, and in conjunction with this reporting structure realignment, management completed a goodwill impairment assessment. As disclosed by management, determining the fair value of the Company’s reporting units for goodwill requires significant estimates and judgments by management. When a quantitative analysis is performed, management uses the income approach, which requires several estimates, including future cash flows consistent with management’s strategic plans, sales growth rates and discount rates. 

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment for a certain reporting unit within the North America Oral, Personal and Home Care segment prior to the reporting structure realignment is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of a certain reporting unit within the North America Oral, Personal and Home Care segment prior to the reporting structure realignment; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the sales growth rates and the discount rate; 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 goodwill impairment assessment, including controls