Company: EHC
Filing Date: 2025-10-31
Form Type: 10-Q
Source: 0000785161-25-000115
Chunk: 48

Company: Encompass Health Corp
Filing Date: 2025-10-31
Form: 10-Q
Item: Part I, Item 1
Chunk 48
---
 are currently evaluating the requirements of this standard and any potential impact it may have on our condensed consolidated financial statements.In September 2025, the FASB issued ASU 2025-06, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software,” which intends to modernize the guidance related to internal-use software costs to reflect current software development methods. ASU 2025-06 requires entities to begin capitalizing software costs when management authorizes and commits to funding the software project, and it is probable the project will be completed and the software will be used for its intended purpose. ASU 2025-06 is effective for our annual and interim periods beginning January 1, 2028. Early adoption is permitted. The guidance can be applied on a prospective basis, a modified basis for in-process projects, or on a retrospective basis. We are currently evaluating the requirements of this standard and any potential impact it may have on our condensed consolidated financial statements.We do not believe any other recently issued, but not yet effective, accounting standards will have a material effect on our condensed consolidated financial position, results of operations, or cash flows.

9

Encompass Health Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements

2.Business Combinations

During the nine months ended September 30, 2025, we completed the following acquisition which was not individually material to our financial position, results of operations, or cash flows. The acquisition was made to enhance our position and ability to provide inpatient rehabilitation services to patients in the applicable geographic area.•In May 2025, we acquired 51% of the operations of a 54-bed inpatient rehabilitation unit in Fort Myers, Florida when Lee Healthcare Holdings, LLC contributed those operations to our existing joint venture.We accounted for this transaction under the acquisition method of accounting and reported the results of operations of the acquired unit from the date of acquisition. Assets acquired were recorded at their estimated fair values as of the acquisition date. The estimated fair value of the noncompete intangible asset was based on an income approach using discounted cash flow techniques. The aforementioned income method utilizes management’s estimates of future operating results and cash flows discounted using a weighted-average cost of capital. The excess of the fair value of the consideration conveyed over the fair value of the assets acquired was recorded as goodwill. The goodwill reflects our expectations of our ability to gain access to and penetrate the acquired unit’s historical