Company: ADP
Filing Date: 2025-08-06
Form Type: 10-K
Source: 0000008670-25-000037
Chunk: 82

Company: AUTOMATIC DATA PROCESSING INC
Filing Date: 2025-08-06
Form: 10-K
Item: Item 7
Chunk 82
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-adjusted weighted-average cost of capital, and the market approach, which is based upon using market multiples of companies in similar lines of business. Significant assumptions used in determining the fair value of our reporting units include projected revenue growth rates, profitability projections, working capital assumptions, the weighted average cost of capital, the determination of appropriate market comparison companies, and terminal growth rates. Several of these assumptions including projected revenue growth rates and profitability projections are dependent on our ability to upgrade, enhance, and expand our technology and services to meet client needs and preferences.   

Sensitivity of Estimate to Change

Some of the inherent estimates and assumptions used in determining the fair value of the reporting units are outside the control of management including the weighted-average cost of capital, tax rates, market comparisons, and terminal growth rates. While we believe we have made reasonable estimates and assumptions to calculate the fair value of the reporting units, it is possible a material change could occur. If our actual results are not consistent with our estimates and assumptions used to calculate fair value, it could result in material impairments of our goodwill. The assumptions used to assess impairment consider historical trends, macroeconomic conditions, and projections consistent with the Company’s operating strategy. Changes in these estimates can have a significant impact on the assessment of fair value which could result in material impairment losses.

42

We completed our annual assessment of goodwill as of June 30, 2025 and determined that there was no impairment of goodwill. We performed a sensitivity analysis and determined that a one percentage point increase in the weighted-average cost of capital would not result in an impairment of goodwill for all reporting units and their fair values substantially exceeded their carrying values.

Income Taxes

Description

Judgment is required in addressing the future tax consequences of events that have been recognized in our Consolidated Financial Statements or tax returns (e.g., realization of deferred tax assets, changes in tax laws or interpretations thereof).  A change in the assessment of the outcomes of such matters could materially impact our Consolidated Financial Statements.  

Judgments and Uncertainties

The Company computes its provision for income taxes based on the statutory tax rates in the various jurisdictions in which it operates. Assumptions, judgment, and the use of estimates are required in determining if the “more likely than not” standard has been met when computing the provision for income taxes, deferred tax assets and liabilities, and uncertain tax positions.  

Sensitivity of Estimate to Change

While the Company considers all of its tax positions fully supportable, the Company is occasionally challenged by various tax authorities regarding the amount