Elanco Animal Health IncELAN

Elanco Animal Health Inc Goodwill & Intangibles Disclosure

10-KFiled Feb 24, 20262 min read
Note 11. Goodwill and Intangibles
Goodwill
The following table summarizes the changes in the carrying amount of goodwill:
December 31, 2023$5,094 
Divestiture of our aqua business(458)
Foreign currency translation and other adjustments(222)
December 31, 20244,414 
Foreign currency translation and other adjustments365 
December 31, 2025$4,779 
As previously disclosed, due principally to an increased discount rate environment, driven by a sharp increase in long-term treasury rates, we recorded a pre-tax goodwill impairment charge of $1,042 during the year ended December 31, 2023. No impairments to goodwill were recorded during either of the years ended December 31, 2025 or 2024.
Other Intangible Assets
The gross amount of intangible assets and related accumulated amortization, as of December 31, were as follows:
2025
2024
Description
Carrying Amount, Gross
Accumulated Amortization
Carrying Amount, Net
Carrying Amount, Gross
Accumulated Amortization
Carrying Amount, Net
Finite-lived intangible assets:
Marketed products$7,237 $(3,949)$3,288 $6,402 $(3,151)$3,251 
Software264 (170)94 260 (144)116 
Other54 (36)18 52 (29)23 
Total finite-lived intangible assets7,555 (4,155)3,400 6,714 (3,324)3,390 
Indefinite-lived intangible assets:
Acquired IPR&D (1)
8 — 8 283 — 283 
Trade names— — — 8 — 8 
Total intangible assets:$7,563 $(4,155)$3,408 $7,005 $(3,324)$3,681 
(1)The reduction in acquired IPR&D in 2025 is attributable to the U.S. Department of Agriculture (USDA) approval for Befrena, an anti-IL31 monoclonal antibody injection targeting canine allergic and atopic dermatitis. This asset had been included in acquired IPR&D since its acquisition from Kindred Biosciences, Inc. in 2021. Upon receiving USDA approval, we reclassified this asset to marketed products and will amortize it over its estimated economic life.
Intangible assets with finite lives are capitalized and amortized over their estimated economic lives. As of December 31, 2025, the remaining weighted-average amortization periods for finite-lived intangible assets were as follows:
Weighted-Average Life (Years)
Marketed products7
Software5
Other5
In the fourth quarter of 2025, we determined one of our marketed product intangible assets was impaired due to a decline in projected future sales of the underlying product group, and recorded an impairment charge of $47 million to write the asset down to its estimated fair value. Our fair value assessment used an income approach, which incorporated Level 3 fair value inputs not observable in the market, including estimates relating to revenue and margin forecasts for the product group underlying the marketed product asset and an appropriate discount rate.
The estimated amortization expense for each of the next five years associated with our finite-lived intangible assets, as of December 31, 2025, is as follows:
20262027202820292030
Estimated amortization expense$560 $534 $532 $509 $372 
For the years ended December 31, 2025, 2024 and 2023, amortization expense related to software was $31 million, $40 million and $54 million, respectively.

Historical Timeline

Fiscal YearFiled
2025Feb 24, 2026Showing above
2024Feb 25, 2025
2023Feb 26, 2024
2022Mar 1, 2023
2021Feb 28, 2022
2020Mar 1, 2021
2019Feb 28, 2020
2018Feb 20, 2019

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.

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