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  "documentTitle": "Avery Dennison Corporation (AVY)",
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  "authorName": "Ben Axler",
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  "presentationDate": "2020-11-10 00:00:00",
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  "notes": "Uses direct quotes from 2018 and 2019 annual reports to build a case for potential goodwill impairment.",
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      "text": "IHM manufactures and sells tapes and adhesives products for industrial and medical applications as well as fastener solutions. This segment has struggled, and there is indication that it may be worse than management is letting on. In 2017, Avery acquired Yongle Tape ($160m in sales), a supplier to the Chinese and global auto market included in the segment. In 2018, Avery quickly pointed out that Yongle Tape’s fair value exceeded its carrying value by just 22%. In the recent 10-K a “Critical Audit Matter” was raised around IHM goodwill impairment. Through 2020, Avery has continued to blame IHM on auto weakness and still hasn’t impaired goodwill.(1)",
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      "text": "1) Q3 Conf Call: “The Industrial and Healthcare Materials segment, sales declined 7.6% on an organic basis compared to the 21% decline in Q2, reflecting sequential improvement entrance for automotive applications, particularly in China and North America”",
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      "text": "Avery 2018 Annual Report: Additionally, in our annual impairment analysis, the goodwill of reporting units in our Industrial and Healthcare Materials reportable segment were tested utilizing a quantitative assessment. This assessment indicated that the fair values of these reporting units exceeded their respective carrying amounts, including goodwill. Except for our Yongle Tape reporting unit acquired in 2017, the fair values of these reporting units exceeded their carrying amounts by 100% or more. Yongle Tape's fair value exceeded its carrying value by 22%, assuming a discount rate of 12% and a perpetual growth rate of 3.5%. As of December 29, 2018, the carrying value of Yongle Tape's goodwill was $81.7 million.",
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      "text": "Avery's 2019 Annual Report Included A “Critical Audit Matter” Around Goodwill Impairment: Goodwill Impairment Assessment of One Reporting Unit in the Industrial and Healthcare Materials (“IHM”) Reportable Segment... The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of one reporting unit in the IHM reportable segment is a critical audit matter are there was significant judgment by management when developing the fair value measurement of the reporting unit.",
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      "text": "IHM Segment: Signs The Segment Is Under Greater Stress Than Appears",
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