Company: WBD
Filing Date: 2025-02-27
Form Type: 10-K
Source: 0001437107-25-000031
Chunk: 119

Company: Warner Bros. Discovery, Inc.
Filing Date: 2025-02-27
Form: 10-K
Item: Item 7
Chunk 119
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 differ from those used in the valuations.

The carrying value of the Networks reporting unit exceeded its fair value and we recorded a pre-tax, non-cash goodwill impairment charge of $9.1 billion during the second quarter of 2024 in impairments and loss on dispositions in the consolidated statements of operations. The goodwill impairment charge does not have an impact on the calculation of our financial covenants under our debt arrangements.

As of October 1, 2024, we performed a quantitative goodwill impairment assessment for all of our reporting units. The estimated fair value of each reporting unit exceeded its carrying value and, therefore, no impairment was recorded. The DTC reporting unit had headroom of 20%. The Studios reporting unit, which had headroom of 16%, and the Networks reporting unit, which had headroom of 12%, both had fair values in excess of carrying value of less than 20%. The fair values of the reporting units were determined using a combination of DCF and market valuation methodologies. A 0.5% increase in the discount rate and a 1% decrease in the long-term growth rate would not result in an impairment loss across the reporting units.

We continue to monitor our reporting units for triggers that could impact the recoverability of goodwill. Long-term trends and risks we are monitoring in our ongoing assessment include, but are not limited to, the following:

•the delta between market capitalization and book value;

•uncertainty related to affiliate rights renewals associated with our Networks and DTC reporting units;

•declining levels of global GDP growth and continued softness in the U.S. linear advertising market associated with our Networks reporting unit;

•content licensing trends and volatility related to the performance of theatrical film and game slates in our Studios reporting unit; and

•risks in executing the projected growth strategies of our DTC reporting unit.

Content Rights

We capitalize the costs to produce or acquire feature films and television programs, and we amortize costs and test for impairment based on whether the content is predominantly monetized individually, or as a group.

For films and television programs predominantly monetized individually, the amount of capitalized film and television production costs (net of incentives) amortized and the amount of participations and residuals to be recognized as expense in a particular period are determined using the individual film forecast method. Under this method, the amortization of capitalized costs and the accrual of participations and residuals are based on the proportion of the film’s or television program’s revenues recognized for such period