Will REZI report a goodwill impairment charge in its 2025 10-K?

Despite clear acquisition distress (P&S -8%, ADI collapse 32%→3%, Snap One $23M markdown), GAAP latitude in discount rates and growth assumptions allows deferral. Management removed goodwill testing assumptions since 2021 suggesting active management to avoid triggering. Honeywell ~$70M EBITDA benefit boosts fair value calculations. $220M restructuring pattern shows management absorbs losses through restructuring not impairment.

Two independent lenses converged on acquisition value destruction. Snap One 12-year customer life vs 7-8 year industry norm (43% above baseline) may face auditor scrutiny post-Spruce Point short report (Jan 2026). ADI exclusive brands collapse 32%→3% in one quarter suggests structural issue. However, CD&R accumulating $288M+ suggests PE sponsor with board visibility does not expect near-term impairment.

Focusing on revealed behavior: CD&R's aggressive $288M accumulation across 6 tranches is the strongest counter-signal — PE sponsors with board seats have visibility into goodwill testing outcomes and would not buy if impairment imminent. Management has unused deferral tools: Honeywell EBITDA benefit, reporting unit flexibility, undisclosed assumptions. Spruce Point report too recent (Jan 2026) to influence year-end 2025 testing. Most likely path is continued deferral.

Multiple distress signals converge: Snap One $23M inventory markdown (8.7%), ADI exclusive brands collapse 29pp in one quarter, P&S revenue -8% post-First Alert. These operational failures undermine fair value assumptions. However, GAAP's discretionary latitude gives management significant room to avoid impairment even when underlying value declines.

Honeywell settlement (~$70M EBITDA benefit) provides material upside to fair value calculations offsetting acquisition underperformance. Management's pattern of absorbing integration costs through restructuring ($220M cumulative) rather than impairment shows clear playbook for avoiding write-downs. Testing assumptions removed since 2021 suggests maintained flexibility to pass testing.

Two independent lenses converged on M&A value destruction. Insider selling by management (including ADI President during collapse) signals anticipation of further deterioration. Control4 stagnation (+5% in 4 years, flat dealer count) suggests acquisition thesis was flawed pre-Snap One, making 12-year customer life assumption increasingly indefensible. Q4 2025 trajectory through Q3 points toward impairment territory.

Snap One $23M inventory markdown (8.7%) and ADI exclusive brands growth collapse (32%→3%) represent concrete operational deterioration. Customer life assumption 43% above industry norm creates valuation fragility that auditors may challenge during year-end testing.

Management has not disclosed goodwill impairment testing stress through Q3 2025, suggesting no impairment as of that date or deliberate non-disclosure. Honeywell EBITDA benefit ($70M) may provide fair value headroom. Historical $220M restructuring charge absorption pattern without impairment suggests GAAP discretion preference.

Goodwill testing assumptions removed from disclosure since 2021 is material opacity signal during aggressive M&A period. Insider selling pattern while operations collapse suggests internal anticipation of value destruction. Segment-level goodwill allocation undisclosed; one reporting unit could fail while consolidated metrics appear sufficient.