Goodwill

12 Months Ended

Dec. 30, 2017

Goodwill

(3) Goodwill

As of December 30, 2017, the Company had 12 reporting units with goodwill for which the annual goodwill impairment test was completed. We perform the annual impairment test on the first day of the fourth quarter each year. We initially perform a qualitative analysis. As a result of this analysis, it was determined that it is more likely than not that the fair value of five reporting units were greater than its carrying value. For the remaining reporting units we perform a two-step quantitative analysis. Step 1 of that analysis compares the estimated the fair value of the reporting units using an income approach (i.e., a discounted cash flow technique) and a market approach to the carrying value of the reporting unit. If the estimated fair value exceeds its carrying value, the goodwill of the reporting unit is not considered impaired. If the carrying value of the reporting unit exceeds its fair value, we proceed to the second step to measure the amount of potential impairment loss. Based on this analysis, it was determined that the reporting units’ fair values were greater than their carrying values and no impairment charges were recognized in 2017. The accumulated impairment charges recognized in periods prior to 2015 totaled $68.2 million.

These estimates of a reporting unit’s fair value involve significant management estimates and assumptions, including but not limited to sales prices of similar assets, assumptions related to future profitability, cash flows, and discount rates. These estimates are based upon historical trends, management’s knowledge and experience and overall economic factors, including projections of future earnings potential. Developing discounted future cash flow estimates in applying the income approach required management to evaluate its intermediate to longer-term strategies, including, but not limited to, estimates about revenue growth, operating margins, capital requirements, inflation and working capital management. The development of appropriate rates to discount the estimated future cash flows required the selection of risk premiums, which can materially affect the present value of estimated future cash flows.

The following table presents goodwill by reportable segments and in total:

	West		East		Cement		Total
Balance, January 2, 2016	$	303,926	$	98,308	$	194,163	$	596,397
Acquisitions		29,006		145,109		10,375		184,490
Foreign currency translation adjustments		1,325		—		—		1,325
Balance, December 31, 2016	$	334,257	$	243,417	$	204,538	$	782,212
Acquisitions (1)		187,883		61,957		118		249,958
Foreign currency translation adjustments		4,150		—		—		4,150
Balance, December 30, 2017	$	526,290	$	305,374	$	204,656	$	1,036,320

(1) Reflects goodwill from 2017 acquisitions and working capital adjustments from prior year acquisitions.

Summit Materials, LLC

Goodwill

(3) Goodwill

As of December 30, 2017, the Company had 12 reporting units with goodwill for which the annual goodwill impairment test was completed. We perform the annual impairment test on the first day of the fourth quarter each year. We initially perform a qualitative analysis. As a result of this analysis, it was determined that it is more likely than not that the fair value of five reporting units were greater than its carrying value. For the remaining reporting units we perform a two-step quantitative analysis. Step 1 of that analysis compares the estimated the fair value of the reporting units using an income approach (i.e., a discounted cash flow technique) and a market approach to the carrying value of the reporting unit. If the estimated fair value exceeds its carrying value, the goodwill of the reporting unit is not considered impaired. If the carrying value of the reporting unit exceeds its fair value, we proceed to the second step to measure the amount of potential impairment loss. Based on this analysis, it was determined that the reporting units’ fair values were greater than their carrying values and no impairment charges were recognized in 2017. The accumulated impairment charges recognized in periods prior to 2015 totaled $68.2 million.

These estimates of a reporting unit’s fair value involve significant management estimates and assumptions, including but not limited to sales prices of similar assets, assumptions related to future profitability, cash flows, and discount rates. These estimates are based upon historical trends, management’s knowledge and experience and overall economic factors, including projections of future earnings potential. Developing discounted future cash flow estimates in applying the income approach required management to evaluate its intermediate to longer-term strategies, including, but not limited to, estimates about revenue growth, operating margins, capital requirements, inflation and working capital management. The development of appropriate rates to discount the estimated future cash flows required the selection of risk premiums, which can materially affect the present value of estimated future cash flows.

The following table presents goodwill by reportable segments and in total:

	West		East		Cement		Total
Balance, January 2, 2016	$	303,926	$	98,308	$	194,163	$	596,397
Acquisitions		29,006		145,109		10,375		184,490
Foreign currency translation adjustments		1,325		—		—		1,325
Balance, December 31, 2016	$	334,257	$	243,417	$	204,538	$	782,212
Acquisitions (1)		188,883		61,957		118		250,958
Foreign currency translation adjustments		4,150		—		—		4,150
Balance, December 30, 2017	$	527,290	$	305,374	$	204,656	$	1,037,320

(1) Reflects goodwill from 2017 acquisitions and working capital adjustments from prior year acquisitions.