GOODWILL

12 Months Ended

Dec. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 9: GOODWILL

The assignment of goodwill and changes in the carrying amount of goodwill, by business segment, for fiscal 2022 and 2021 were as follows:


(In millions)	Integrated Mission Systems		Space & Airborne Systems		Communication Systems		Aviation Systems(2)		Total

Balance at January 1, 2021	$	6,499	$	5,232	$	4,153	$	2,992	$	18,876
Goodwill decrease from divestitures(1)	—		—		—		(564)		(564)
Impairment of goodwill	—		—		—		(62)		(62)
Currency translation adjustments	(14)		(30)		—		(17)		(61)

Balance at December 31, 2021 - As Reported	6,485		5,202		4,153		2,349		18,189
Reallocation of goodwill in segment reorganization(2)	1,702		647		—		(2,349)		—
Balance at December 31, 2021 - After Reallocation	8,187		5,849		4,153		—		18,189
Assets of business held for sale(1)	—		(30)		—		—		(30)
Impairment of goodwill	(447)		—		(355)		—		(802)
Currency translation adjustments	(31)		(41)		(2)		—		(74)

Balance at December 30, 2022	$	7,709	$	5,778	$	3,796	$	—	$	17,283

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(1)During fiscal 2022, we assigned $30 million of goodwill associated with the pending VIS business divestiture to “Assets of business held for sale ” in our Consolidated Balance Sheet. During fiscal 2021, we completed the divestiture of six businesses (Narda-MITEQ business, ESSCO business, CPS business, military training business, Electron Devices business and VSE disposal group) and derecognized $564 million of goodwill as part of determining the gain or loss on the sales of these businesses. See Note 4: Business Divestitures and Asset Sales in these Notes for additional information regarding completed divestitures and businesses held for sale.

(2)As a result of our new organizational structure effective January 1, 2022, streamlining our operations from four business segments to three business segments, we reallocated goodwill previously held by our former Aviation Systems segment to our remaining business segments as of January 1, 2021, the earliest period presented in these Notes. See additional information below and “Organizational Structure and Change in Accounting Policy” in Note 1: Significant Accounting Policies in these Notes.

New Organizational Structure

Effective January 1, 2022, we implemented a new organizational structure resulting in changes to our operating segments (which are also our reportable segments and are referred to as our business segments) and reporting units (which are our business segments or one level below our business segments). Implementing the new structure reduced our business segments, from four to three, and our reporting units from eleven to nine. As a result, we reassigned goodwill to our new reporting unit structure on a relative fair value basis, tested goodwill related to impacted reporting units immediately before and after the reassignment and determined that no impairment existed.

Precision Engagement Business Allocation and Impairment — Fiscal 2022

During the quarter ended September 30, 2022, we realigned our precision engagement business from our ADG reporting unit to our Electro Optical reporting unit. In connection with the realignment, we transferred $325 million of goodwill associated with the precision engagement business to our Electro Optical reporting unit on a relative fair value basis. Immediately before and after the reassignment, we tested goodwill assigned to each reporting unit. As a result of these tests, concurrently with the preparation of our financial statements for the quarter ended September 30, 2022, we concluded that goodwill related to our ADG reporting unit was impaired immediately before the reassignment and recorded a non-cash charge of $313 million for the impairment in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations. The impairment of goodwill was due to lower sales volume in our precision engagement business, reflecting U.S. Government spending priorities with respect to precision weapons, and higher interest rates. ADG and Electro Optical are both part of our IMS segment. We prepared an estimate of the fair value of our precision engagement business based on a combination of market-based valuation techniques, utilizing quoted market prices, comparable publicly reported transactions and projected discounted cash flows.

Broadband, Electro Optical and ADG Interim Impairment Testing — Fiscal 2022

Indications of potential impairment of goodwill related to our Broadband, Electro Optical and ADG reporting units were present as of September 30, 2022. Consequently, in connection with the preparation of our financial

statements for the quarter ended September 30, 2022, we performed interim impairment tests for each of these reporting units based on a combination of market-based valuation techniques, utilizing quoted market prices and comparable publicly reported transactions and projected discounted cash flows. We determined goodwill related to our Broadband and Electro Optical reporting units was impaired and goodwill related to our ADG reporting unit was not impaired as of September 30, 2022. As a result, we recorded $489 million of non-cash charges for the impairment of goodwill ($355 million and $134 million for Broadband and Electro Optical, respectively) in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations. Broadband is part of our CS segment (as noted above, Electro Optical is part of our IMS segment). The impairment of goodwill related to our Electro Optical reporting unit was due to persistently lower demand in the precision engagement business and an associated decrease in our outlook for the business, as well as rising interest rates. The impairment of goodwill related to our Broadband reporting unit was due to lower volume on legacy platforms, which also resulted in a decrease in our outlook for the reporting unit, and higher interest rates.

CPS Business Impairment — Fiscal 2021

During the quarter ended April 2, 2021, we determined the criteria to be classified as held for sale were met with respect to the CPS business within our Aviation Systems segment and assigned $174 million of goodwill to the disposal group on a relative fair value basis. In connection with the preparation of our financial statements for the quarter ended April 2, 2021, we concluded that goodwill related to the CPS business was impaired and we recorded a non-cash impairment charge of $62 million, which is included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations for fiscal 2021. See Note 4: Business Divestitures and Asset Sales in these Notes for additional information.

Commercial Aviation Solutions Impairments — Fiscal 2020

Indications of potential impairment of goodwill related to our Commercial Aviation Solutions reporting unit (which is part of our former Aviation Systems segment) were present at April 3, 2020 due to COVID and its impact on global air traffic and customer operations, resulting in a decrease in fiscal 2020 outlook for the reporting unit, which we considered to be a triggering event requiring an interim impairment test. Consequently, in connection with the preparation of our financial statements for the quarter ended April 3, 2020, we performed a quantitative impairment test. To test for potential impairment of goodwill related to our Commercial Aviation Solutions reporting unit, we prepared an estimate of the fair value of the reporting unit based on a combination of market-based valuation techniques, utilizing quoted market prices, comparable publicly reported transactions and projected discounted cash flows. Given the level of uncertainty in the outlook for the commercial aviation industry caused by the impact of COVID on global air traffic, our methodology for determining the fair value of the reporting unit placed the greatest weight on the expected fair value technique, and was dependent on our best estimates of future sales, operating costs and balance sheet metrics under a range of scenarios for future economic conditions. We assigned a probability to each scenario to calculate a set of probability-weighted projected cash flows, and an appropriate discount rate reflecting the risk in the projected cash flows was used to discount the expected cash flows to present value.

As adverse global economic and market conditions attributable to COVID, including projected declines and subsequent recovery in commercial air traffic and original equipment manufacturer production volumes, continued to develop during fiscal 2020, we continued to monitor for facts and circumstances that could negatively impact key valuation assumptions in determining the fair value of our Commercial Aviation Solutions reporting unit, including recent valuations, expectations regarding the timing of a return to pre-COVID commercial flight activity and the associated level of uncertainty, long-term revenue and profitability projections, discount rates and general industry, market and macroeconomic conditions. As a result, we determined indications of further impairment of assets related to our Commercial Aviation Solutions reporting unit existed as of July 3, 2020 and again as of early December 2020.

As a result of these impairment tests, we concluded that goodwill and other assets related to our Commercial Aviation Solutions reporting unit were impaired as of April 3, 2020, July 3, 2020 and January 1, 2021, and we recorded the following non-cash impairment charges:

•$461 million (including $34 million attributable to noncontrolling interests) for impairment of goodwill during fiscal 2020, including $111 million recognized in the fourth quarter of fiscal 2020; and

•$257 million for impairment of long-lived assets recognized during the fourth quarter of fiscal 2020, including $113 million for identifiable assets (see Note 10: Intangible Assets in these Notes for additional information), $103 million for property, plant and equipment (see Note 8: Property, Plant and Equipment, Net in these Notes for additional information), $31 million for ROU assets (see Note 18: Lease Commitments in these Notes for additional information) and $10 million for marketable software.

These charges are included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations for fiscal 2020 and are primarily not deductible for tax purposes.

Applied Kilovolts Business Impairment — Fiscal 2020

During the quarter ended April 3, 2020, we determined the criteria to be classified as held for sale were met with respect to the Applied Kilovolts business within our SAS segment and assigned $6 million of goodwill to the Applied Kilovolts business on a relative fair value basis. In connection with the preparation of our financial statements for the quarter ended April 3, 2020, we concluded that goodwill related to the Applied Kilovolts business was impaired and recorded a non-cash impairment charge of $5 million, which is included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations for fiscal 2020.

VSE Disposal Group Impairment — Fiscal 2020

During the quarter ended July 3, 2020, we determined the criteria to be classified as held for sale were met with respect to the VSE disposal group within our Aviation Systems segment and assigned $14 million of goodwill to the VSE disposal group on a relative fair value basis. In connection with the preparation of our financial statements for the quarter ended July 3, 2020, we concluded that goodwill related to the VSE disposal group was impaired and recorded a non-cash impairment charge $14 million, which is included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations for fiscal 2020.