Company: DTK
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0000936340-25-000065
Chunk: 125

Company: DTE ENERGY CO
Filing Date: 2025-02-13
Form: 10-K
Item: Item 7
Chunk 125
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 on discounted cash flows, and the market approach, which estimates fair value based on market comparables within the utility and energy industries.  For the Energy Trading reporting unit, only the income approach was used due to the lack of comparable market information.

Discounted cash flows used in the income approach are based on DTE Energy's internal business plan for the next five years plus a terminal value.  DTE Energy capitalizes the terminal value for each reporting unit using a weighted average cost of capital (WACC) less an assumed long-term growth rate.  The income approach cash flow valuations involve a number of estimates that require broad assumptions and significant judgment by management regarding future performance. 

One of the most significant assumptions utilized in determining the fair value of reporting units under the market approach is implied market multiples for certain peer companies.  Management selects comparable peers based on each peer’s primary business mix, operations, and market capitalization compared to the applicable reporting unit and calculates implied market multiples based on available projected earnings guidance and peer company market values as of the test date. 

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DTE Energy performs an annual impairment test each October.  In between annual tests, DTE Energy monitors its estimates and assumptions regarding estimated future cash flows, including the impact of movements in market indicators in future quarters, and will update the impairment analyses if a triggering event occurs.  While DTE Energy believes the assumptions are reasonable, actual results may differ from projections.  To the extent projected results or cash flows are revised downward, the reporting unit may be required to write down all or a portion of its goodwill, which would adversely impact DTE Energy's earnings.

DTE Energy performed its annual impairment test as of October 1, 2024.  In estimating fair value for the income approach, DTE Energy used discounted rates ranging from 6.5% to 9.0%.  Based on the weighting of the estimated fair value using an income and market approach, DTE Energy determined that the estimated fair value of each reporting unit substantially exceeded its carrying value, and no impairment existed.

Long-Lived Assets

The Registrants evaluate the carrying value of long-lived assets, excluding goodwill, when circumstances indicate that the carrying value of those assets may not be recoverable.  Conditions that could have an adverse impact on the cash flows and fair value of the long-lived assets are deteriorating business climate, condition of the asset, or plans to dispose of the asset before the end of its useful life.  The review of long-lived assets for impairment requires significant assumptions about