Annual report pursuant to Section 13 and 15(d)

Goodwill and Other Intangible Assets

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Goodwill and Other Intangible Assets
12 Months Ended
Dec. 31, 2023
Goodwill and Other Intangible Assets  
Goodwill and Other Intangible Assets

(5) Goodwill and Other Intangible Assets

Goodwill

Changes in the carrying amount of goodwill are as follows:

    

QxH

QVC International

CBI

Corporate and Other

    

Total

 

amounts in millions

 

Balance at January 1, 2022

$

5,228

855

12

244

6,339

Foreign currency translation adjustments

(77)

(77)

Impairments

(2,535)

(226)

(2,761)

Balance at December 31, 2022

2,693

778

12

18

3,501

Foreign currency translation adjustments

7

7

Dispositions (1)

(18)

(18)

Impairments

(326)

(326)

Balance at December 31, 2023

$

2,367

785

12

3,164

(1) Zulily goodwill was eliminated as a result of the divestiture of Zulily on May 24, 2023 (see note 1).

As presented in the accompanying consolidated balance sheets, tradenames is the other significant indefinite lived intangible asset, $2,698 million of which related to the QxH segment.

Intangible Assets Subject to Amortization

Intangible assets subject to amortization are comprised of the following:

December 31, 2023

December 31, 2022

 

    

Gross

    

    

    

Net

    

Gross

    

    

    

Net

 

carrying

Accumulated

carrying

carrying

Accumulated

carrying

 

amount

amortization

amount

amount

amortization

amount

 

amounts in millions

 

Television distribution rights

$

592

 

(509)

 

83

 

664

 

(592)

 

72

Customer relationships

 

2,825

 

(2,684)

 

141

 

3,307

 

(3,120)

 

187

Other

 

1,193

 

(891)

 

302

 

1,473

 

(1,120)

 

353

Total

$

4,610

 

(4,084)

 

526

 

5,444

 

(4,832)

 

612

The weighted average life of these amortizable intangible assets was approximately nine years at the time of acquisition.  However, amortization is expected to match the usage of the related asset and will be on an accelerated basis as demonstrated in table below.

Amortization expense for intangible assets with finite useful lives was $305 million, $323 million and $352 million for the years ended December 31, 2023, 2022 and 2021, respectively. Based on its amortizable intangible assets as of December 31, 2023, Qurate Retail expects that amortization expense will be as follows for the next five years (amounts in millions):

2024

    

$

271

2025

$

155

2026

$

92

2027

$

8

2028

$

Impairments

During the fourth quarter of 2023, it was determined that an indication of impairment existed for the QxH reporting unit. With the assistance of a third party specialist, the fair value of the QxH reporting unit was determined using a discounted cash flow method (Level 3), and a goodwill impairment, in the amount of $326 million, was recorded to impairment of intangible assets in the consolidated statements of operations. Based on the impairment losses recorded during the year, the estimated fair value of the QxH reporting unit does not significantly exceed its carrying value as of December 31, 2023.

During the third quarter of 2022, as a result of recent financial performance and macroeconomic conditions including inflation and higher interest rates, the Company initiated a process to evaluate its current business model and long-term business strategy. It was determined during the third quarter of 2022 that an indication of impairment existed for the QxH and Zulily reporting units related to their tradenames and goodwill. With the assistance of a third party specialist, the fair value of the tradenames was determined using the relief from royalty method, primarily using a discounted cash flow model using QxH’s and Zulily’s projections of future operating performance (income approach) and applying a royalty rate (market approach) (Level 3), and impairments in the amounts of $180 million and $140 million for QxH (related to the tradename associated with the HSN brand) and Zulily, respectively, were recorded during the third

quarter of 2022, in the impairment of intangible assets line item in the consolidated statements of operations. With the assistance of a third party specialist, the fair value of the QxH and Zulily reporting units was determined using a discounted cash flow method (Level 3), and goodwill impairments in the amounts of $2,535 million and $226 million for QxH and Zulily, respectively, were recorded during the third quarter of 2022, in the impairment of intangible assets line item in the consolidated statements of operations.

Additionally, during the fourth quarter of 2021, Zulily’s business deteriorated significantly. The same process discussed above was followed and as a result, an impairment of the tradename and goodwill for the amounts of $130 million and $233 million, respectively, were recorded in the impairment of intangible assets line item in the consolidated statements of operations.

As of December 31, 2023 the Company had accumulated goodwill impairment losses of $2,861 million attributed to the QxH reporting unit.