WESTWOOD HOLDINGS GROUP INCWHG

WESTWOOD HOLDINGS GROUP INC Goodwill & Intangibles Disclosure

10-KFiled Mar 4, 20212 min read
GOODWILL AND OTHER INTANGIBLE ASSETS:
Goodwill
Goodwill represents the excess of the cost of acquired assets over the fair value of the underlying identifiable assets at the date of acquisition. Changes in goodwill were as follows (in thousands):
As of December 31,
 20202019
Beginning balance$19,804 $19,804 
Impairment expense(3,403)— 
Ending balance$16,401 $19,804 
Following a sustained decline in the Company's market capitalization, we determined that the entire goodwill related to our Advisory segment was impaired, and we recorded impairment charges of $3.4 million in the year ended December 31, 2020 to "Impairment expense" on the Consolidated Statements of Comprehensive Income (Loss).
We determined the fair value of each of our reporting units using a weighted average approach of the market and income approaches. As part of this current assessment, we determined that an increase in the discount rate (from the prior assessment) applied in the valuation was required to align with market-based assumptions. The higher discount rate, in conjunction with revised long-term projections resulted in a lower fair value of the Advisory segment.
Other Intangible Assets
Our intangible assets represent the acquisition date fair value of acquired client relationships, internally-developed software and trade names, and are reflected net of amortization. In valuing these assets, we made significant estimates regarding their useful lives, growth rates and potential attrition.
The following is a summary of intangible assets at December 31, 2020 and 2019 (in thousands, except years):
 
Weighted Average
Amortization
Period (years)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
2020    
Client relationships14.8$21,431 $(8,850)$12,581 
Internally developed software5.81,439 (485)954 
 $22,870 $(9,335)$13,535 
2019    
Client relationships14.8$21,431 $(7,416)$14,015 
Internally developed software5.81,439 (233)1,206 
Trade names4.9708 (673)35 
 $23,578 $(8,322)$15,256 

Amortization expense, which is included in “General and administrative” expense on our Consolidated Statements of Comprehensive Income (Loss), was $1.7 million for each of the years ended December 31, 2020, 2019 and 2018.
Estimated amortization expense for intangible assets over the next five years is as follows (in thousands):
For the year ending December 31,
Estimated
Amortization Expense
2021$1,623 
2022$1,623 
2023$1,604 
2024$1,529 
2025$1,372 

Historical Timeline

Fiscal YearFiled
2020Mar 4, 2021Showing above
2019Feb 20, 2020
2018Feb 21, 2019
2017Feb 23, 2018
2016Feb 23, 2017
2015Feb 25, 2016

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.

Other Available Disclosures

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