Intangible Assets

3 Months Ended

Dec. 31, 2022

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Intangible Assets, net

The Company's intangible assets consist of the following for the periods indicated:


(In millions)	Technology and Patents		Customer Relationships and Other Intangibles		Trademarks and Trade Names		Total
Balance as of December 31, 2022
Finite-lived intangible assets:
Cost	$	966	$	2,149	$	42	$	3,157
Accumulated amortization	(834)		(781)		(25)		(1,640)
Finite-lived intangible assets, net	132		1,368		17		1,517
Indefinite-lived intangible assets:
Cost	—		—		333		333
Accumulated impairment	—		—		(155)		(155)
Indefinite-lived intangible assets, net	—		—		178		178
Intangible assets, net	$	132	$	1,368	$	195	$	1,695
Balance as of September 30, 2022
Finite-lived intangible assets:
Cost	$	964	$	2,146	$	42	$	3,152
Accumulated amortization	(797)		(741)		(25)		(1,563)
Finite-lived intangible assets, net	167		1,405		17		1,589
Indefinite-lived intangible assets:
Cost	—		—		333		333
Accumulated impairment	—		—		(146)		(146)
Indefinite-lived intangible assets, net	—		—		187		187
Intangible assets, net	$	167	$	1,405	$	204	$	1,776

Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets. Intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Intangible assets determined to have indefinite useful lives are not amortized but are subject to impairment testing annually, on July 1st, or more frequently if events occur or circumstances change that indicate an asset may be impaired.

As announced in a Form 8-K dated December 13, 2022, the Company was unable to reach an out-of-court resolution with certain holders of the Convertible Notes, Senior Notes, Exchangeable Notes, and the Term Loans outstanding under the Term Loan Credit Agreement, regarding one or more potential financings, refinancings, recapitalizations, reorganizations, restructurings, or investment transactions involving the Company. As a result, the Company revised its outlook to reflect the increased likelihood of a solvency event. The Company concluded that a triggering event had occurred and performed an interim quantitative impairment test for its indefinite-lived intangible asset, the Avaya Trade Name, as of December 31, 2022 to compare the fair value of the Avaya Trade Name to its carrying amount.

The fair value of the Avaya Trade Name was estimated using the relief-from-royalty model, a form of the income approach. Under this methodology, the fair value of the trade name was estimated by applying a royalty rate to forecasted net revenues which was then discounted using a risk-adjusted rate of return on capital. The model relies on assumptions regarding revenue growth rates, royalty rate, discount rate and terminal growth rate. Revenue growth rates inherent in the forecast were based on input from internal and external market intelligence research sources that compare factors such as growth in global economies, regional industry trends and product evolutions. The royalty rate was determined using a set of observed market royalty rates. The discount rate the Company used represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk and the rate of return an outside investor would expect to earn. To estimate royalty cash flows beyond the final year of its model, the Company used a terminal value approach. Under this approach, the Company applied a perpetuity growth assumption to determine the terminal value. The Company incorporated the present value of the resulting terminal value into its estimate of fair value. The result of the interim impairment test of the Avaya Trade Name as of December 31, 2022 indicated that the carrying amount of the Avaya Trade Name exceeded its estimated fair value primarily due to the updated outlook. As a result, the Company recorded an indefinite-lived intangible asset impairment charge of $9 million within the Impairment charges line item in the Condensed Consolidated Statements of Operations, representing the amount by which the carrying

amount of the Avaya Trade Name exceeded its fair value. As of December 31, 2022, the remaining carrying amount of the Avaya Trade Name was $178 million.To the extent that business conditions deteriorate further or if changes in key assumptions and estimates differ significantly from management's expectations, it may be necessary to record additional impairment charges in the future.

Avaya Holdings Corp. 10-Q