Canopy Growth Corp Goodwill & Intangibles Disclosure
15. GOODWILL
The changes in the carrying amount of goodwill are as follows:
|
Balance, March 31, 2020 |
|
$ |
1,954,471 |
|
|
Foreign currency translation adjustments |
|
|
(65,117 |
) |
|
Balance, March 31, 2021 |
|
$ |
1,889,354 |
|
|
Purchase accounting allocations |
|
|
105,323 |
|
|
Disposal of consolidated entities |
|
|
(58,786 |
) |
|
Impairment losses |
|
|
(40,748 |
) |
|
Foreign currency translation adjustments |
|
|
(28,640 |
) |
|
Balance, March 31, 2022 |
|
$ |
1,866,503 |
|
At March 31, 2022, the Company performed its annual goodwill impairment analysis using the quantitative assessment. The Company concluded that the carrying values of its KeyLeaf and This Works reporting units were higher than their respective estimated fair values as determined using the income valuation method, and a goodwill impairment loss totaling $40,748 was recognized in the year ended March 31, 2022 (year ended March 31, 2021 - $nil). The goodwill impairment loss was comprised of (i) $22,355 related to the KeyLeaf reporting unit, representing the entirety of the goodwill assigned to the KeyLeaf reporting unit; and (ii) $18,393 related to the This Works reporting unit. Certain negative trends, including slower growth rates, resulted in updated long-term financial forecasts indicating lower forecasted revenue and cash flow generation for the KeyLeaf and This Works reporting units. No impairment was noted for any of the Company’s other reporting units, as the estimated fair value of each of the other reporting units with goodwill exceeded their carrying value.
The estimated fair value of the cannabis operations reporting unit in the global cannabis segment was determined using the market valuation method, with the most significant assumptions used in applying this method being (i) the price of the Company’s common shares; and (ii) the estimated control premium associated with ownership of the Company’s common shares. The estimated fair values of all other reporting units (KeyLeaf, This Works, BioSteel and Storz & Bickel) were determined using the income valuation method, with the most significant assumptions used in applying this method being (i) the discount rate; (ii) the expected long-term growth rate; and (iii) the annual cash flow projections. These methodologies are consistent with those used by the Company for its annual impairment test conducted at March 31, 2021, and for the quantitative interim goodwill assessment conducted by the Company for the cannabis operations reporting unit at December 31, 2021.
The carrying value, at March 31, 2022, of the goodwill associated with the Company’s cannabis operations reporting unit was $1,727,848. For the cannabis operations reporting unit, if all other assumptions were held constant and the estimated control premium was decreased by 500 basis points, the estimated fair value would decrease by 7% and result in an impairment charge. If all other assumptions were held constant and the share price decreased by 10%, the estimated fair value would decrease by 15% and result in an impairment charge.
The carrying value, at March 31, 2022, of the goodwill associated with the Company’s BioSteel reporting unit was $57,339. For the BioSteel reporting unit, if all other assumptions were held constant and the discount rate was increased by 50 basis points, the estimated fair value would decrease by 8%. If all other assumptions were held constant and the long-term growth rate was decreased by 50 basis points, the estimated fair value would decrease by 3%. If all other assumptions were held constant and the annual cash flow projections were decreased by 250 basis points, the estimated fair value would decrease by 5%.
The carrying value, at March 31, 2022, of the goodwill associated with the Company’s Storz & Bickel reporting unit was $79,027. For the Storz & Bickel reporting unit, if all other assumptions were held constant and the discount rate was increased by 50 basis points, the estimated fair value would decrease by 6%. If all other assumptions were held constant and the long-term growth rate was decreased by 50 basis points, the estimated fair value would decrease by 4%. If all other assumptions were held constant and the annual cash flow projections were decreased by 250 basis points, the estimated fair value would decrease by 3%.
At March 31, 2022, the fair value of the cannabis operations reporting unit to which goodwill is assigned exceeded its carrying value by approximately 5% to 10%. Accordingly, the goodwill assigned to the cannabis operations reporting unit is at risk for impairment in future periods. The Company may be required to perform a quantitative goodwill impairment assessment in future periods for the cannabis operations reporting unit, to the extent the Company continues to experience declines in the price of its common shares from March 31, 2022, reductions in the estimated control premium associated with ownership of the Company’s common shares, or other indicators of impairment arise.
The carrying value, at March 31, 2022, of the goodwill associated with the Company’s This Works reporting unit was $2,289.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2022 | May 31, 2022 | Showing above |
| 2021 | Jun 1, 2021 | |
| 2020 | Jun 1, 2020 | |
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.