GOODWILL
Goodwill represents the excess of the consideration transferred over the fair value of net assets, including identifiable intangible assets, at the acquisition date. Goodwill is assessed for impairment annually on October 1 or more frequently if events or changes in circumstances indicate a potential impairment exists.
In July 2025, we allocated $30.8 million of goodwill to our Diamond Power business in connection with its sale, as discussed further in Note 5 to the Consolidated Financial Statements. We did not identify any impairment in the retained goodwill balances subsequent to the allocation of goodwill to the Diamond Power business.
In the fourth quarter of 2025, our reporting units changed as part of our reassessment of our reportable segment structure. See Note 6 to the Consolidated Financial Statements for further discussion of our assessment.
The annual quantitative assessment was performed using a combination of the income approach (discounted cash flows), the market approach and the guideline transaction method. The income approach uses the reporting unit's estimated future cash flows, discounted at the weighted-average cost of capital of a hypothetical third-party buyer to account for uncertainties within the projections. The income approach uses assumptions based on the reporting unit's estimated revenue growth, operating margin, and working capital turnover. The market approach estimates fair value by applying cash flow multiples to the reporting unit's operating performance. The multiples are derived from comparable publicly traded companies with similar characteristics to the reporting unit. The guideline transaction method estimates fair value by applying recent observed transaction multiples from transactions involving companies with similar characteristics to the reporting unit's business. The fair market value calculated in the quantitative assessment exceeded the carrying amount of each of the reporting units by more than 100% at October 1, 2025.
The following summarizes the changes in the net carrying amount of goodwill in the Consolidated Balance Sheets:
| | | | | |
| (in thousands) | |
| Balance at December 31, 2023 | $ | 54,297 | |
| Currency translation adjustments | (2,886) | |
| Balance at December 31, 2024 | $ | 51,411 | |
| Currency translation adjustments | 1,686 | |
| Balance at December 31, 2025 | $ | 53,097 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.