Datasets:

ChunLok

/

CAM-SentimentScore

like 0

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. income taxes - receivables for south korean tax disputes as described in notes 1, 5, and 10 to the consolidated financial statements, in evaluating the tax benefits associated with the company’s various tax filing positions, management records a tax benefit for uncertain tax positions using the highest cumulative tax benefit that is more likely than not to be realized. adjustments are made to the liability for unrecognized tax benefits in the period in which management determines the issue is effectively settled with the tax authorities, the statute of limitations expires for the return containing the tax position or when new information becomes available. the company is currently appealing certain south korean tax assessments and tax refund claims for tax years 2010 through 2018. the company is required to deposit the disputed tax amounts with the south korean government as a condition of its appeal of any tax assessments. management believes that it is more likely than not that these tax positions will prevail in the appeal process and as a result, management recorded a non-current receivable of $415 million as of december 31, 2019 for the amount on deposit with the south korean government. in the fourth quarter of 2019, the company received a refund of $38 million from the south korean government related to tax years 2006 through 2009. as of december 31, 2019, management has also recorded a current receivable of $33 million for an amount refunded in january 2020 related to the same issue for the tax year 2015. the principal considerations for our determination that performing procedures relating to the receivables for south korean tax disputes is a critical audit matter are there was significant judgment by management when applying the more likely than not recognition criteria to the company’s uncertain tax positions based on the application of the tax law. this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence relating to management’s assumption that the company will prevail in the appeal of any tax assessments. in addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. © 2020 corning incorporated. all rights reserved. 68index addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to uncertain tax positions, including management’s assessment of the south korean tax disputes. these procedures also included, among others, obtaining management’s assessment and evidence supporting the more-likely-than-not tax position on the south korean tax disputes and evaluating the reasonableness of the likelihood that the tax positions will ultimately be sustained upon examination by the south korean tax authorities and through the appeal process. professionals with specialized skill and knowledge were used to assist in evaluating management’s assessment and supporting evidence, including application of the tax law. impairment at the equity method investee, hemlock semiconductor group - the long-lived asset impairment of the solar power panel asset group (“solar group”) as described in notes 1 and 6 to the consolidated financial statements, the company’s equity method investments are reviewed for impairment on a periodic basis or if an event occurs or circumstances change that indicate the carrying amount may be impaired. this assessment is based on a review of the equity investments’ performance and a review of indicators of impairment to determine if there is evidence of a loss in value of an equity investment. hemlock semiconductor llc and hemlock semiconductor operations llc, of which the company has 49.9% and 40.25% ownerships respectively, are recorded as equity method investments and are affiliated companies of hemlock semiconductor group (hsg). due to the adverse change in hsg’s solar business, hsg was required to assess the recoverability of its long-lived assets in the fourth quarter. based on this assessment, hsg determined that the carrying values of hsg’s solar group significantly exceeded its fair value. hsg engaged a third-party appraiser to assist in determining the fair value of the assets within the solar group based on the highest and best use of the asset group. as a result of the fair value determination, hsg recognized pre-tax asset impairment charges of $916 million for the year ended december 31, 2019. the company’s share of the pre-tax impairment was $369 million. the principal considerations for our determination that performing procedures relating to hsg’s long-lived asset impairment of the solar group is a critical audit matter are there was a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence relating to (i) management’s assessment of the impairment at hsg, and (ii) the determination of the asset groups and the fair value of the assets within hsg’s solar group, including the assumptions related to the highest and best use of the assets. in addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the equity method investment accounting, including controls over management’s recording of the company’s share of the pre-tax impairment at hsg’s solar group. these procedures also included, among others, (i) evaluating management’s assessment of the impairment at hsg and the company’s share of the pre-tax impairment, and (ii) testing hsg’s process for determining the fair value of the long-lived assets within hsg’s solar group. testing the fair value of these long-lived assets included determining the appropriateness of the asset groups and reasonableness of the assumptions related to the determination of the fair value of the long-lived assets in the solar group based on their highest and best use. professionals with specialized skill and knowledge were used to assist in evaluating the assumptions related to the highest and best use of the long-lived assets and evaluating the consistency of the assumptions with evidence obtained in other areas of the audit. /s/ pricewaterhouse coopers llp new york, new york february 14, 2020 we have served as the company’s auditor since 1944.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. revenue recognition — refer to note 2 to the financial statements critical audit matter description the company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those products or services. the company offers customers the ability to acquire multiple licenses of products and services. 44table of contents significant judgment is exercised by the company in determining revenue recognition for these customer agreements, and includes the following: ·determination of whether products and services are considered distinct performance obligations that should be accounted for separately versus together, such as hard goods and related services that are sold with telephony contracts. ·determination of stand-alone selling prices for each distinct performance obligation and for products and services that are not sold separately. ·the pattern of delivery (i.e., timing of when revenue is recognized) for each distinct performance obligation. given these factors, the related audit effort in evaluating management’s judgments in determining revenue recognition for these customer agreements required a high degree of auditor judgment. how the critical audit matter was addressed in the audit our principal audit procedures related to the company’s revenue recognition for these customer agreements included the following: ·we gained an understanding of internal controls related to the identification of distinct performance obligations, the determination of the timing of revenue recognition, and the relative selling value. ·we evaluated management’s significant accounting policies related to these customer agreements for reasonableness. ·we selected a sample of customer agreements and performed the following procedures: o obtained and read contract source documents for each selection and other documents that were part of the agreement, if applicable. o tested management’s identification of significant terms for completeness, including the identification of distinct performance obligations and relative selling price. o assessed the terms in the customer agreement and evaluated the appropriateness of management’s application of their accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions. o we evaluated the reasonableness of management’s estimate of stand-alone selling prices for products and services that are not sold separately. o we tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements. income taxes — valuation allowances on deferred tax assets — refer to note 14 to the financial statements critical audit matter description the company’s consolidated net deferred tax asset historically included a full valuation allowance, primarily related to the deferred tax assets established for u.s. net operating loss carryforwards. management records valuation allowances to reduce the carrying value of deferred tax assets to amounts that are more likely than not to be realized. management assesses existing deferred tax assets by jurisdiction and expectations of the company’s ability to utilize these tax attributes through a review of past, current and estimated future taxable income, reversals of temporary differences and establishment of tax planning strategies. for the year-ended december 31, 2021, the company recorded a deferred tax asset of $7,001,000. the principal considerations for our determination that performing procedures relating to the income tax valuation allowance on deferred tax assets is a critical audit matter as there was significant judgment by management when estimating future income. this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence relating to future income. in addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. how the critical audit matter was addressed in the audit our principal audit procedures to evaluate the valuation allowances on deferred tax assets, among others, included the following: ·we gained an understanding of internal controls related to the valuation allowances on deferred tax assets, including controls over the review of management’s analysis by jurisdiction of cumulative income (loss). ·we tested the underlying historical data used in calculating the cumulative income (loss). ·we assessed effects of other events, including past company transactions. ·we tested management’s estimate of future taxable income, which included evaluating the reasonableness of significant assumptions and appropriateness of available tax planning strategies. ·utilized professionals with specialized skill and knowledge to assist in evaluating management’s analysis, including cumulative income (loss) as well as the reasonableness of the estimates. business combinations – valuation of intangible assets — refer to note 4 to the financial statements critical audit matter description the company completed the acquisitions of centric telecom, inc. and net sapiens, inc. for $3,255,000 and $49,062,000, respectively, (collectively referred to as the “acquisitions”) and accounted for as business combinations. the acquired intangible assets included trademarks, technology and customer relationships valued at $400,000, $4,900,000 and $18,000,000, respectively. the company recorded the acquired intangible assets at fair value on the date of acquisition considering a discounted cash flow methodology, a cost approach and relief from royalty method. the methods used to estimate the fair value of acquired intangible assets involve assumptions. the assumptions applied by management in estimating the fair value of acquired intangible assets included income projections and discount rates. the principal considerations for our determination that performing procedures relating to the valuation of intangible assets in the acquisitions is a critical audit matter are (1) there was a degree in significant auditor judgement and subjectivity in applying procedures to the fair value of the intangible assets acquired due to the judgment by management when developing estimates and (2) audit effort was required relating to the estimates, projections, discount rates, and weighted average cost of capital utilized by the company. in addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the conclusions. how the critical audit matter was addressed in the audit our principal audit procedures to evaluate the valuation of intangible assets included the following: ·we read the purchase agreements used in the underlying acquisitions and utilized by the company to allocate the purchase price. ·we obtained the valuation reports prepared by management’s third-party expert. ·utilized professionals with specialized skill and knowledge to evaluate the reasonableness of the methodology, assumptions, including the discount rate and weighted average cost of capital, as compared to their experience and publically available market data. ·considered the reasonableness of the overall allocation of the total purchase price. /s/ urish popeck & co., llc we have served as the company’s auditor since 2016.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgments. the communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate. allowance for loan losses – qualitative factor component the allowance for loan losses as of june 30, 2021 was $19.7 million. as described in notes 1 and 4 to the consolidated financial statements, the allowance for loan losses is established through a provision for loan losses and represents an amount which, in management’s judgement, will be adequate to absorb losses on existing loans. the level of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, payment status of the loan and economic conditions. the allowance consists of specific and general components in the amounts of $0.4 million and $19.3 million, respectively. specific reserves estimate potential losses on identified impaired loans with uncertain collectability of principal and interest. the general component covers pools of loans by loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate, home equity, and other consumer loans. these pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative risk factors. the general component is calculated using a systematic methodology with both a quantitative and a qualitative analysis that is applied on a quarterly basis. for purposes of the allowance methodology, the loan portfolio is segmented as described in note 4. each segment has a distinct set of risk characteristics monitored by management. risk is further assessed and monitored and determined at a more disaggregated level, which includes the risk grading system as described in note 4 under credit quality indicators. 47index critical audit matters (continued) to determine the general component of the allowance the company applies the historical loss rate to pools of loans with similar risk characteristics. after consideration of the historic loss analysis, management applies additional qualitative adjustments so that the allowance for loan losses is reflective of the estimate of incurred losses that exist in the loan portfolio at the statement of financial condition date. qualitative adjustments are made if the incurred loan losses inherent in the loan portfolio are not fully captured in the historical loss analysis. qualitative considerations include changes in underwriting standards and policies; changes in market and economy; changes in nature volume and terms, experience; changes in the ability and depth of lending management and staff; changes in volume of delinquency and non-accruals; changes in the quality of the loan review system; changes in collateral, changes in concentrations of credit; and other external factors.the evaluation of the qualitative factors requires a significant amount of judgement by management and involves a high degree of subjectivity. we identified the qualitative factor component of the allowance for loan losses as a critical audit matter as auditing the underlying qualitative factors required significant auditor judgment as amounts determined by management rely on analysis that is highly subjective and includes significant estimation uncertainty.our audit procedures related to the qualitative factors included the following, among others:•we obtained an understanding of the relevant controls related to management’s assessment and review of the qualitative factors, and tested such controls for design and operating effectiveness, including controls over management’s establishment, review and approval of the qualitative factors and the data used in determining the qualitative factors.•we obtained an understanding of how management developed the estimates and related assumptions, including:o testing completeness and accuracy of key data inputs used in forming assumptions or calculations and testing the reliability of the underlying data on which these factors are based by comparing information to source documents and external information sources.•evaluating the reasonableness of the qualitative factor established by management as compared to the underlying internal or external information sources.we have served as the company’s auditor since 2018.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.evaluation of lease liabilities as discussed in notes 1 and 6 to the consolidated financial statements, the company’s lease liabilities as of december 31, 2019 were $528 million. the lease liability represents the obligation to make the lease payments arising from leases, measured on a discounted basis, using an estimated incremental borrowing rate. we identified the evaluation of the company’s lease liability recorded as of january 1, 2019, the transition date for the adoption of accounting standards update 2016-02 – leases (topic 842), to be a critical audit matter. 27 specialized skills were required to evaluate the company’s assumptions used to determine the lease liability, specifically the incremental borrowing rates. the primary procedures we performed to address this critical audit matter included the following. we tested certain internal controls over the company’s lease liability determination process including controls to evaluate the incremental borrowing rates used to calculate the lease liability. we involved a valuation professional with specialized skills and knowledge, who assisted in understanding the company’s methodology and assumptions used to determine the incremental borrowing rates. the valuation professional also assisted us in developing an independent estimate of the incremental borrowing rates. we compared the independent estimate of the incremental borrowing rates to those utilized by the company, and we performed sensitivity analyses over the incremental borrowing rates to assess the impact on the company’s calculation of the lease liability.evaluation of the sufficiency of audit evidence over revenue as described in note 13 to the consolidated financial statements, the company earned $6.8 billion of revenue in 2019. the revenue was primarily generated by the pork, commodity, trading and milling, marine, sugar and alcohol, and power reporting segments. within these reporting segments, the company has operating locations associated with consolidated entities in over 45 countries. revenue generated based on the location of the operations sourcing the product or service primarily resides within the united states, colombia, and south africa, and comprised 42% of revenue. the remaining 58% of revenue was sourced from other countries throughout the caribbean, central, and south america, africa, pacific basin and far east, canada/mexico, europe, and other countries. we identified the evaluation of the sufficiency of audit evidence over revenue as a critical audit matter. the geographical dispersion of revenue required especially subjective auditor judgment in determining which locations to perform procedures and evaluating the sufficiency of audit evidence. furthermore, given the time zone, language and business composition differences between countries, our audit team consisted of auditors located in multiple countries around the world. the primary procedures we performed to address this critical audit matter included the following. we evaluated the nature and amounts of the company’s revenue at its various locations and applied auditor judgment to determine the locations at which procedures were to be performed. we tested certain internal controls over the company’s revenue process, including controls related to the recognition and consolidation of global revenue amounts. we tested a sample of individual revenue transactions by comparing the amounts recognized by the company to relevant underlying documentation such as contracts. in addition, we evaluated the overall sufficiency of audit evidence obtained over revenue. we have served as the company’s auditor since 1959.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. uncertain tax positions as described in notes 1 and 5 to the consolidated financial statements, the total amount of gross unrecognized tax benefits was approximately $333.7 million as of december 31, 2021. management records uncertain tax positions on the basis of a two-step process in which (i) management determines whether it is more likely than not that the tax positions would be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. the recognition and measurement of tax liabilities for uncertain tax positions in any tax jurisdiction requires the interpretation of the related tax laws and regulations as well as the use of estimates and assumptions regarding significant future events. changes in tax laws, regulations, agreements and treaties, foreign currency exchange restrictions or the level of operations or profitability in each taxing jurisdiction could have an impact on the amount of income taxes during any given year. the principal considerations for our determination that performing procedures relating to uncertain tax positions is a critical audit matter are the (i) significant judgment by management in determining those items that require recognition as it is more likely than not that the tax positions would be sustained on the basis of the technical merits of the position based on the interpretation of related tax laws and regulations, which in turn led to significant auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s determination of uncertain tax positions based on management’s interpretation of tax laws and regulations, and (ii) the audit effort involved the use of professionals with specialized skill and knowledge. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the operating effectiveness of controls relating to determining the uncertain tax positions that require recognition. these procedures also included, among others, (i) testing management’s process for recognizing uncertain tax positions, including evaluation of the completeness, and (ii) for certain uncertain tax positions, testing management’s assessment of the technical merits of the uncertain tax positions based on their interpretation of related tax laws and regulations. professionals with specialized skill and knowledge were used to assist in testing (i) management’s process for recognizing uncertain tax positions and (ii) management’s assessment of the technical merits of the uncertain tax positions. /s/ pricewaterhouse coopers llp houston, texas march 9, 2022 we have served as the company's auditor since 2021.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.mortgage servicing rights — refer to notes 1 and 5 to the financial statements critical audit matter description the company has elected to account for its mortgage servicing rights (“ms rs”) at fair value. subsequent to initial recognition, the fair value of ms rs is estimated with the assistance of an independent third-party valuation expert based upon a valuation model that calculates the estimated present value of future cash flows. the valuation model incorporates market estimates of 73table of contentsprepayment speeds, discount rate, cost to service, and other assumptions. the company’s ms rs balance was $3.314 billion at december 31, 2021.we identified the valuation of ms rs as a critical audit matter because of (i) the significant judgments made in determining the prepayment speeds and discount rate assumptions (“significant valuation assumptions”) given the limited market observability of these assumptions, and (ii) the high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the appropriateness of these significant valuation assumptions.how the critical audit matter was addressed in the audit our audit procedures related to the significant valuation assumptions used by management to estimate the fair value of the company’s ms rs included the following, among others:•we tested the design and operating effectiveness of controls over management’s valuation of ms rs including management’s evaluation of the reasonableness of the significant assumptions used in the valuation expert’s model.•we inquired of the company’s third-party valuation expert regarding the reasonableness of the significant valuation assumptions and the appropriateness of the valuation model.•we assessed the reasonableness of the significant valuation assumptions used within the valuation model by comparing the assumptions used by the company to the assumptions used by other third-party valuation experts as well as comparable entities.•with the assistance of our fair value specialists, we evaluated the ms rs fair value by comparing it against a fair value range that was independently developed using market data.•we performed a retrospective review of msr sales in comparison to the msr fair value estimates of the company’s third-party valuation expert.variable interest entities — refer to notes 1 and 12 to the financial statements critical audit matter description upon completion of the business combination transaction on january 21, 2021, uwm holdings, llc (holdings llc) became a consolidated subsidiary of the company, as holdings llc was ultimately determined by management to be a variable interest entity ("vie") for which the company was deemed to be the primary beneficiary. we identified the designation of holdings llc as a vie, requiring consolidation by the company as the primary beneficiary, as a critical audit matter based on the significant judgements and interpretations required of management in its vie assessment and the impact that consolidation of holdings llc has on the presentation of the company's consolidated financial statements, specifically the presentation of sfs corp.’s ownership interest as a non-controlling interest.74table of contents how the critical audit matter was addressed in the audit our audit procedures related to management's holdings llc consolidation assessment included the following, among others:•we tested the design and operating effectiveness of controls over management’s review of the business combination and the related holdings llc vie conclusion.•we inquired of key members of management to confirm our understanding of key provisions of the business combination agreement.•we obtained managements analysis of the holdings llc consolidation conclusion and analyzed the related agreements to determine if management's assessment considered all significant provisions that might impact their vie and primary beneficiary assessment. •with the assistance of professionals in our firm having expertise in consolidation accounting, we evaluated the company’s conclusion that holdings llc should be consolidated as a vie as well as the conclusion that the company was the primary beneficiary./s/ deloitte & touche llp detroit, michigan march 1, 2022we have served as the company's auditor since 2020.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.allowance for credit losses – qualitative macroeconomic adjustments as described in notes a and d to the consolidated financial statements, management estimates the allowance for credit losses using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. as of december 31, 2021, the allowance for credit losses was $49.9 million on loans of $7.4 billion. historical credit loss experience provides the basis for the estimation of expected credit losses. adjustments are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, acquired loans, delinquency level, risk ratings or term of loans as well as changes in macroeconomic conditions, such as changes in unemployment rates, property values such as home prices, commercial real estate prices and automobile prices, gross domestic product, recession probability, and other relevant factors. for qualitative macroeconomic adjustments, management uses third party forecasted economic data scenarios utilizing a base scenario and two alternative scenarios. the principal considerations for our determination that performing procedures relating to qualitative macroeconomic adjustments to the allowance for credit losses is a critical audit matter are (i) the significant judgment by management in determining the macroeconomic qualitative adjustments, which led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating related evidence; and (ii) the audit effort involved the use of professionals with specialized skill and knowledge. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the company’s allowance for credit losses estimation process, including controls over qualitative macroeconomic adjustments. these procedures also included, among others, testing management’s process for determining qualitative macroeconomic adjustments to the allowance for credit losses, including evaluating the appropriateness of management’s methodology, testing data used in the qualitative macroeconomic adjustments, and evaluating the determination of the impact of forecasted macroeconomic conditions. professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of the qualitative macroeconomic adjustments./s/pricewaterhouse coopers llp buffalo, new york march 1, 2022 we have served as the company’s auditor since 1984.

critical audit matter the critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.determination of capitalized development costs as discussed in notes 2 and 6 to the consolidated financial statements, the company capitalizes certain internal costs related to the design, development and enhancement of the company’s products and services as well as internal-use software. the company capitalized $14 million of internal development costs during the year ended december 31, 2019. we identified that capitalization of software development internal costs to be a critical audit matter. the principal consideration for our determination that capitalized internal cost of software development is a critical audit matter is the degree of subjectivity involved in assessing which projects met the capitalization criteria, based on the development stage of the project and the costs being capitalized.f-2 our audit procedures related to the capitalization of software development internal costs included the following, among others. we tested the design and operating effectiveness of internal controls over the company’s process to capitalize internal costs of software development, including controls to evaluate the nature of the costs incurred and assessing the development stage to determine which development projects met the capitalization criteria. we evaluated the company’s current year project capitalization conclusions based on an understanding of a sample of development projects and the associated software development activities, by working with relevant project management. we also assessed the reliability of the company’s conclusions through confirmations with a sample of individual developers regarding the nature of their development activities. we tested the underlying support for capitalized amounts by agreeing a sample of such amounts to supporting documentation. we have served as the company’s auditor since 2015.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.fair value of equity investment in rothmans, benson & hedges inc. ("rbh")as described in note 22 to the consolidated financial statements, the company recorded the fair value of its continuing investment in rbh of $3.28 billion within investments in unconsolidated subsidiaries and equity securities in the consolidated balance sheets. this investment was recorded as of march 22, 2019, which represented the fair value at the date of deconsolidation. the estimated fair value of the underlying business was determined based on an income approach using a discounted cash flow analysis, as well as a market approach for certain contingent liabilities. the discounted cash flow analysis and market approach include management assumptions relevant for forecasting operating cash flows, which are subject to changes in business conditions, such as volumes, pricing, the terminal growth rate, discount rates, inflation scenarios, and other strategic plans. the difference between the carrying value of the assets and liabilities of rbh that were deconsolidated and the fair value of the continuing investment was recorded as a $239 million pre-tax loss on deconsolidation within marketing, administration and research costs on the company’s consolidated statement of earnings. the principal considerations for our determination that performing procedures relating to the deconsolidation of rbh is a critical audit matter are that there was significant judgment by management required when developing the fair value measurement of the continuing investment in rbh. this led to a high degree of auditor subjectivity, judgment and effort in performing procedures and evaluating the estimated fair value of rbh which included significant assumptions related to the terminal growth rate, discount rates, inflation scenarios, and operating cash flow projections; and to evaluate management's estimate of the value of certain contingent liabilities. the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the estimated fair value of the rbh investment, including controls over the discounted cash flow analysis and market approach, input data and key assumptions utilized in determination of the fair value. these procedures also included, among others, testing management’s process for determining the fair value of the continuing investment in rbh as of the date of deconsolidation. this included evaluating the appropriateness of the discounted cash flow analysis and market approach to value the contingent liabilities including the reasonableness of the input data and significant assumptions used by management in developing the fair value measurement including the terminal growth rate, discount rates, inflation scenarios, operating cash flow projections, market size and market share data. professionals with specialized skill and knowledge were used to assist in evaluating the company’s discounted cash flow analysis and market approach, and evaluation of significant assumptions, including the terminal growth rate, discount rates and inflation scenarios utilized by the company. evaluating whether the significant assumptions were reasonable involved considering (i) the past performance of the associated canadian reporting unit, and (ii) whether they were consistent with evidence obtained in other areas of the audit.smoking and health and health care cost recovery contingencies as described in note 18 to the consolidated financial statements, the company has 77 smoking and health cases and health care cost recovery actions pending. the company records provisions in the consolidated financial statements for pending litigation when they determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. except as stated otherwise in note 18, while it is reasonably possible that an unfavorable outcome in a case may occur, after assessing the information available, (i) management has not concluded that it is probable that a loss has been incurred in any of the pending smoking and health and health care cost recovery tobacco-related cases; (ii) management is unable to estimate the possible loss or range of loss for any of the pending smoking and health and health care cost recovery tobacco-related cases; and (iii) accordingly, no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases, if any. the principal considerations for our determination that performing procedures relating to smoking and health and health care cost recovery contingencies is a critical audit matter are that there was significant judgment by management when determining the probability of a loss being incurred and an estimate of the amount or range of the potential loss for each case, which in turn led to a high degree of auditor 111subjectivity, judgment and effort in evaluating management’s assessment related to the loss contingencies associated with smoking and health and health care cost recovery related claims. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s evaluation of smoking and health and health care cost recovery litigation matters, including controls over determining the probability and range of loss as well as financial statement disclosures. these procedures also included, among others, evaluating the completeness of the company’s description of smoking and health and health care cost recovery contingencies, obtaining and evaluating the letters of audit inquiry with external and internal legal counsel, evaluating the reasonableness of management’s assessment regarding whether an unfavorable outcome is reasonably possible or probable and reasonably estimable, and evaluating the sufficiency of the company’s smoking and health and health care cost recovery contingencies disclosures./s/

critical audit matters thecritical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicatedor required to be communicated to the board of directors (those charged with governance) that: (1) relate to accounts or disclosuresthat are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. the communicationof critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicatingthe critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to whichthey relate. f-1 recognitionof revenue the group recognizes revenue and cost derived from long term contract which span more than one accounting period over time using the apportionmentof time method. revenue for the financial year ended may 31, 2021 and 2020 were usd 1,075,010 and usd 803,840 respectively. revenue fromlong term contracts represent approximately 49% and 8% of the total group’s revenue in respective financial year. theapportionment of time method used to recognize revenue on the basis of the group’s effort or inputs to the satisfaction of a performanceobligation. wefocused on this are because the management applies significant judgment and estimates in determining the apportionment of time for revenuerecognized and to be recognized, the extent of costs incurred and yet to be incurred. ouraudit procedures in this area included the following, among others: (a)reading all key contracts to obtain an understanding of the specific terms and conditions; (b)reviewing management’s workings on the computation based on time apportionment to ascertain the reasonableness of the amount of revenue and cost recognized in profit or loss; (c)agreeing samples of revenue recognized to date to invoice and assessing the adequacy of accrual of costs made; and (d)assessing the adequacy and reasonableness of the disclosures in the financial statements. recoverabilityand impairment of trade receivables the group recognizes trade receivables usd 8,477 and usd 436,620 as at may 31, 2021 and 2020 respectively, as disclosed in note 6 to theconsolidated financial statements. the trade receivables as represents approximately 1% and 13% of the group’s total assets forrespective financial year. wefocus and assess the recoverability of the trade receivables involved judgements and estimation uncertainty in analyzing historical trendin bad payment, indicators of expected credit losses (ecl), customer concentration, customer creditworthiness and customer payment termsand adjusted for forward looking macro-economic factors. ouraudit procedures in this area included the following, among others: (a)understanding the group’s identification, monitoring, and assessment on the impairment of receivables; (b)understanding the group’s basis and justification in making accounting estimates for impairment; (c)reviewing ageing analysis of receivables and testing the reliability thereof; (d)reviewing subsequent collections for major receivables and overdue amount; (e)making inquiries of management regarding the action plans to recover overdue amount; (f)understanding of the receivables with significant credit exposures which were significantly overdue or deemed to be in default; and (g)evaluating the reasonableness and adequacy of the bad debts written off recognized for identified exposures. recoverabilityand impairment of non-trade receivables the group recognizes non-trade receivables usd 216,683 and usd 2,518,698 as at may 31, 2021 and 2020 respectively, as disclosed in note 7to the consolidated financial statements. the non-trade receivables as represents approximately 28% and 72% of the group’s totalassets for both financial years. non-tradereceivables are significant account to the group and need to re-align to the group’s principal activities, core business activitiesand objectives. we assess the recoverability of the non-trade receivables involved judgements and estimation uncertainty in analyzinghistorical trend in bad payment, indicators of expected credit losses (ecl), non-trade parties’ concentration, non-trade parties’creditworthiness and non-trade parties ‘payment terms and adjusted for bases on case-to-case basis. f-2 ouraudit procedures in this area included the following, among others: (a)understanding the group’s identification, monitoring, and assessment on the impairment of receivables; (b)understanding the group’s basis and justification in making accounting estimates for impairment; (c)reviewing ageing analysis of receivables and testing the reliability thereof; (d)reviewing subsequent collections for major receivables and overdue amount; (e)making inquiries of management regarding the action plans to recover overdue amount; (f)understanding of the receivables with significant credit exposures which were significantly overdue or deemed to be in default; and (g)evaluating the reasonableness and adequacy of the bad debts written off recognized for identified exposures. recoverabilityand impairment of amount due from shareholders the group recognizes amount due from shareholders usd 43,500 and usd 51,458 as at may 31, 2021 and 2020 respectively, as disclosed in note11 to the consolidated financial statements. amount due from shareholders are remained receivables and represent significant corporategovernance challenge to the group and require prompt action to re-align to the group’s corporate governance and objectives. weassess the recoverability of the amount due from shareholders involved judgements and estimation uncertainty in analyzing historicaltrend in bad payment, indicators of expected credit losses (ecl), shareholders’ concentration, shareholders’ creditworthinessand shareholders’ payment terms and adjusted accordingly. ouraudit procedures in this area included the following, among others: (a)understanding the group’s identification, monitoring, and assessment on the impairment of receivables; (b)understanding the group’s basis and justification in making accounting estimates for impairment; (c)reviewing ageing analysis of receivables and testing the reliability thereof; (d)reviewing subsequent collections for major receivables and overdue amount; (e)making inquiries of management regarding the action plans to recover overdue amount; (f)understanding of the receivables with significant credit exposures which were significantly overdue or deemed to be in default; and (g)evaluating the reasonableness and adequacy of the allowance for impairment recognized for identified exposures. impairmentassessment on intangible assets the group recognizes intangible assets amounting to usd 32,974 and usd 29,646 as at may 31, 2021 and 2020, as disclosed in note 8 to theconsolidated financial statements, representing approximately 4% and 1% of the group’s total assets for respective financial year. the group carries out impairment test by comparing the recoverable amount of cash generating unit (“cgu”) based on the valuein use method and the carrying amounts. the impairment test was significant due to the complexity of the assessment process involvingsignificant judgements and estimation uncertainty in making key assumptions about future market and economic conditions, growth rates,profit margins, discount rate, etc. for value in use of cgu based on future discounted cash flows. ouraudit procedures in this area included the following, among others: (a)examining management’s cash flows forecast that support the impairment assessment; (b)assessing the reliability of management’s forecast through the review of past trends of actual financial performance against previous forecasted results; (c)assessing the key assumptions on which the cash flows projections are based, by amongst others, comparing them against business plans, contracts with customers, historical results and market data; (d)performing sensitivity analysis to stress test the key assumptions and inputs used in the impairment assessment; and (e)assessing the adequacy and reasonableness of the disclosure in the financial statements. f-3 completeness,existence and accuracy of staff advances the group recognizes staff advances amounting to usd 30,157 and usd 3,099 as at may 31, 2021 and 2020, as disclosed in note 7 to the consolidatedfinancial statements, representing approximately 4% and 0.08% of the group’s total assets for respective financial year. the group provides advances to employees for their out-of-pocket expenses. upon incurred, employees will subsequently observe protocol setforth within the group for record keeping. ouraudit procedures in this area included the following, among others: (a)examining management’s record to support the incurrence and accuracy; (b)assessing the reliability of management’s protocol set forth; and (c)assessing management’s record with cut off to support completeness. contingentliabilities recentdisputes with a third party may lead to potential liabilities exposure or contingent liabilities to the group. a contingent liabilityis a liability that may occur depending on the outcome of an uncertain future event. a contingent liability is recorded if the contingencyis likely and the amount of the liability can be reasonably estimated. as at may 31, 2021, the group has provided a provision of usd94,192 at their best estimate based on facts and circumstances prevailed, as disclosed in note 13 to the consolidated financial statements. ouraudit procedures in this area included the following, among others: (a)enquiry and interview of management; (b)obtain representation from management and/or solicitor confirmation; (c)perform subsequent event review and review minutes and/or correspondence in relation to the disputes; and (d)assessing the adequacy and reasonableness of the disclosure in the financial statements. /s/total asia associates plt total asia associates plt we have served as the company’s auditor since 2020.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.61purchase price allocation as described in notes 1 and 4 to the consolidated financial statements, on july 2, 2020 the company acquired lamar station plaza east for a purchase price of approximately $1.8 million. in connection with this acquisition, the company recorded approximately $5.0 million of tangible and intangible real estate assets and assumed approximately $3.3 million of liabilities. the company allocates the purchase price of acquired real estate to the identifiable assets and liabilities acquired based on their relative fair values. the determination of fair value requires significant judgment to develop the assumptions used in the estimated cash flow projections. we identified the purchase price allocation of lamar station plaza east as a critical audit matter. auditing management’s judgments regarding market-based assumptions used in the estimated cash flow projections including forecasts of future revenue and operating expense growth rates, market lease rates, lease-up periods, capitalization rates and discount rates involved especially challenging auditor judgment due to the nature and extent of audit effort, including the need for specialized knowledge and skill. the primary procedures we performed to address this critical audit matter included: •assessing the reasonableness of significant assumptions, including revenue and operating expense growth rates, estimated market lease rates, lease-up periods, capitalization rates and discount rates, through benchmarking against third-party industry data. •utilizing personnel with specialized knowledge and skills in valuation methodologies to assist in evaluating the reasonableness of the valuation methodologies and assumptions used in the preparation of the purchase price allocation, including estimated market lease rates, lease-up periods, capitalization rates and discount rates. assessment of impairment of real estate properties the company’s real estate properties approximated $174.5 million as of december 31, 2020. as discussed in note 2 to the consolidated financial statements, the company assesses impairment on a property by property basis whenever events or changes in circumstances indicate that the carrying value of a property may not be fully recoverable. impairment is recognized on properties when the expected undiscounted cash flows for a property are less than its carrying amount, at which time the property is written down to its estimated fair value. the company identified the impact on its properties and their tenants resulting from the covid-19 pandemic as a triggering event and, as a result, performed an undiscounted cash flow test on the company’s real estate properties. there were no impairment charges recorded during the year ended december 31, 2020. we identified the assessment of impairment of real estate properties as a critical audit matter. significant management judgment was required in the evaluation of potential impairment indicators and assumptions, as impacted by the covid-19 pandemic, used in the undiscounted cash flow models, including future revenue and operating expense growth rates, capitalization rates, and holding periods. auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the need for specialized knowledge and skill. the primary procedures we performed to address this critical audit matter included: •evaluating management’s assessment of potential impairment indicators, including changes in occupancy, the nature of the real estate properties and its operating and collections performance against historical data. •evaluating management’s assumptions, as impacted by the covid-19 pandemic, including future revenue and operating expense growth rates, capitalization rates, and holding periods used in performing the recoverability test. •utilizing professionals with specialized skills and knowledge in valuation to assist in evaluating the reasonableness of the market-based assumptions utilized by management.62liquidity and management’s plan as described in notes 1 and 8 to the consolidated financial statements, the company’s rental revenue and operating results depend significantly on the occupancy levels at its properties. the impact of covid-19 has resulted in a decline in on-time rental payments and increased requests for rental relief from tenants, delays in closing the remaining mergers and a violation of certain debt covenants included in the company’s loan agreements. additionally, the company has certain debt maturities occurring in the next 12 months. the company’s plan to manage the impacts of the covid-19 pandemic include negotiating loan payment deferrals, amending loan agreements to extend debt maturities, refinancing property-level debt, and obtaining additional liquidity from the preferred investor. the assessment of management’s plan requires significant management judgment and assumptions related to forecasting future cash flows to estimate future liquidity requirements. we identified the company’s assessment of its liquidity and management’s related plans as a critical audit matter. significant judgment is required by management when evaluating the uncertainty related to the effects of the covid-19 pandemic on the company’s financial results and liquidity. in particular, there is a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s liquidity assessment to determine if it is probable that the company will be able to satisfy its obligations as they become due for a period of one year from the date these consolidated financial statements are issued. the primary procedures we performed to address this critical audit matter included: •evaluating management’s liquidity assessment including the probability of management’s plans occurring and management’s ability to accurately forecast future results. •assessing the reasonableness of management’s key assumptions, including projected revenues in the cash flow forecasts, by considering available industry and company specific data on revenue and leasing trends and evaluating positive and negative evidence that support or contradict management’s conclusions. •evaluating management’s disclosures in the consolidated financial statements regarding liquidity and management’s related plans. /s/ bdo usa, llp we have served as the company's auditor since 2018.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.impairment of investment in real estate description of the matter the company’s net investment in real estate totaled $7.1 billion as of december 31, 2020. as discussed in note 2 to the consolidated financial statements, the company assesses for impairment on a real estate asset by real estate asset basis whenever events or changes in circumstances indicate that the carrying value of a real estate asset may not be recoverable. impairment is recognized on real estate assets held for investment when indicators of impairment are present and the future undiscounted cash flows for a real estate asset are less than its carrying amount, at which time the real estate asset is written down to its estimated fair value. there were no impairment charges recognized during the year ended december 31, 2020. auditing the company's impairment assessment for real estate assets is challenging because of the subjective auditor judgment necessary in evaluating management’s identification of indicators of potential impairment and the related assessment of the severity of such indicators, either individually or in combination, in determining whether a triggering event has occurred that requires the company to evaluate the recoverability of the real estate asset.f-3how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s real estate asset impairment assessment process. for example, we tested controls over management’s process for identifying and evaluating potential impairment indicators.our testing of the company’s impairment assessment included, among other procedures, evaluating significant judgments applied in determining whether indicators of impairment were present at any given real estate asset by obtaining evidence to corroborate such judgments and searching for evidence contrary to such judgments. for example, we searched for any tenants or groups of tenants with significant allowances for doubtful accounts or upcoming lease expirations that occupy a substantial portion of a real estate asset. we also searched for any significant declines in operating results of a real estate asset due to occupancy changes, tenant bankruptcies, environmental issues, physical damage, change in intended use or adverse changes in legal factors.purchase price accounting description of the matter during the year ended december 31, 2020, the company completed the acquisition of one real estate property through a consolidated joint venture for a total purchase price of $593.9 million, which was accounted for as an asset acquisition. as discussed in note 2 to the consolidated financial statements, the purchase price, including capitalized acquisition-related costs, was allocated based on the relative fair value of the assets acquired and liabilities assumed. as part of the purchase price allocation, the company estimated market rental rates and market rent growth rates that reflect the risks associated with the leases acquired. the estimated market rental rates and market rent growth rates are utilized as inputs in estimating the fair value of “above- and below-” market leases using the income approach. amortization of “above- and below-” market lease intangible assets and liabilities are recorded in rental revenue over the related lease term. auditing the company’s purchase price allocation was complex due to the significant estimation required by management in determining the fair value assigned to assets acquired and liabilities assumed. in particular, significant estimation was used in management’s selection of market rental rates and market rent growth rates due to the judgmental nature of the inputs as well as the sensitivity of the related lease intangible assets and liabilities to the underlying assumptions. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of the company’s controls over management’s purchase price accounting, including controls over the company’s review of the assumptions underlying the purchase price allocation, the cash flow projections, and the accuracy of the underlying data used.our testing of the company’s purchase price allocation included, among other procedures, assessing the valuation methods and significant assumptions used by management in developing the fair value estimates of the assets acquired and liabilities assumed. for example, we involved our valuation specialists in evaluating the appropriateness of management’s selected estimated market rental rates and market rent growth rates by comparing the selected assumptions to data from independently identified external market data sources. we also evaluated the completeness and accuracy of the underlying data supporting management’s purchase price allocation, tested the incorporation of the significant assumptions in the purchase price allocation, and recalculated the model’s results for clerical accuracy. /s/ ernst & young llp we have served as the company’s auditor since 2009.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. accounting for the mta agreement as described in notes 2 and 19 to the consolidated financial statements, the company has an agreement with the new york metropolitan transportation authority (“mta”). under the mta agreement, as amended in june 2020 and july 2021, the company is obligated to incur the costs and deploy, over a number of years, certain digital advertising screens and mta communications displays, with such deployment amounts being subject to modification as agreed-upon by the company and the mta. title of the various digital displays transfers to the mta on installation. as disclosed by management, the company is entitled to generate revenue through the sale of advertising on transit advertising displays and incurs transit franchise fees payable to the mta, which are calculated based on a percentage of the advertising revenues generated under the contract, subject to a minimum guarantee. the company’s payment obligations with respect to guaranteed minimum annual payment amounts owed to the mta resumed on january 1, 2021, in accordance with the terms of the mta agreement, and any guaranteed minimum annual payment amounts that would have been paid for the period from april 1, 2020 through december 31, 2020 (less any revenue share amounts actually paid during this period using an increased revenue share percentage of 65%) will instead be added in equal increments to the guaranteed minimum annual payment amounts owed for the period from january 1, 2022, through december 31, 2026. as amended in july 2021, (i) the initial 10-year term of the mta agreement was extended to a 13-year initial term. the company has the option to extend this initial 13-year term for an additional five-year period at the end of the 13-year initial term, subject to satisfying certain quantitative and qualitative conditions; and (ii) for any deployment costs deemed authorized after december 31, 2020, the mta and the company will no longer be obligated to directly pay 70% and 30% of the costs, respectively, and these costs will be subject to recoupment in accordance with the mta agreement. the company did not recoup any equipment deployment costs in 2021. the portion of deployment costs expected to be reimbursed from transit franchise fees that would otherwise be payable to the mta are recorded as prepaid mta equipment deployment costs, which were $279.8 million as of december 31, 2021. the portion of deployment costs expected to be reimbursed from advertising revenues that would otherwise be retained by the company are recorded as intangible assets, which were $63 million as of december 31, 2021. management assesses the recoverability of the mta contract on an as-needed basis and applies significant judgment in assessing factors to determine if there is an indication that the revenues expected to be generated over the term of the agreement will not be sufficient to cover all or a portion of the equipment deployment costs, including evaluating macroeconomic conditions (such as the impact of the covid-19 pandemic), industry trends, and events specific to the company, including monitoring the company’s actual installation of digital displays against the deployment schedule. additionally, management’s assessment includes a comparison of revenue projections of the deployed digital displays to actual financial results. the principal considerations for our determination that performing procedures relating to the accounting for the mta agreement is a critical audit matter are the significant judgment by management in evaluating the accounting for the arrangement and associated amendments. this in turn led to significant auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence relating to management’s accounting for the arrangement and the associated amendments. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s accounting for the mta agreement and associated amendments. these procedures also included, among others 62table of contents(i) reading the agreement and associated amendments to assess the accounting implications, (ii) evaluating the actual revenue generated from the deployed digital displays in comparison to management’s revenue projections from the prior year, (iii) evaluating the company’s installation of digital displays against the deployment schedule, and (iv) evaluating whether there were any adverse or negative factors that would impact the revenue projections related to the impact of macroeconomic conditions, industry trends, and events specific to the company. goodwill impairment assessment - u.s. transit reporting unit as described in notes 2 and 5 to the consolidated financial statements, the company’s goodwill balance was $2,077.8 million as of december 31, 2021, and the goodwill balance associated with the u.s. transit reporting unit was $47.6 million. the company tests goodwill qualitatively and/or quantitatively at the reporting-unit level annually for impairment as of october 31 of each year and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value below its carrying amount. management computes the estimated fair value of each reporting unit for which they perform a quantitative assessment using the income approach. under the income approach, the fair value is determined using a discounted cash flow model by adding the present value of the estimated annual cash flows over a discrete projection period to the terminal value, which represents the value of the projected cash flows beyond the discrete projection period. this requires management to use significant estimates and assumptions such as projected revenue growth rates, terminal growth rates, billboard lease and transit franchise expenses, other operating and selling, general, and administrative expenses, capital expenditures, contract renewals and extensions and discount rates. the projected revenue growth rates, billboard lease and transit franchise expenses, other operating and selling, general, and administrative expenses, capital expenditures, and contract renewals and extensions for the projection period are based on internal forecasts of future performance as well as historical trends. the terminal value is estimated based on a perpetual nominal growth rate, which is based on projected long-range inflation and long-term industry projections. the discount rates represent the weighted average cost of capital derived using known and estimated market metrics. the principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the u.s. transit reporting unit is a critical audit matter are the significant judgment by management when developing the fair value of the reporting unit, which in turn led to significant auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to the projected revenue growth rates, other operating and selling, general, and administrative expenses, and contract renewals and extensions. in addition, the audit effort involved the use of professionals with specialized skill and knowledge. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the u.s. transit reporting unit and development of the significant assumptions related to the projected revenue growth rates, other operating and selling, general, and administrative expenses, and contract renewals and extensions. these procedures also included, among others (i) testing management’s process for developing the fair value of the reporting unit, (ii) evaluating the appropriateness of the discounted cash flow model, (iii) testing the completeness and accuracy of data used in the model, and (iv) evaluating the reasonableness of significant assumptions used by management related to the projected revenue growth rates, other operating and selling, general, and administrative expenses, and contract renewals and extensions. evaluating management’s significant assumptions, involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether they were consistent with evidence obtained in other areas of the audit. professionals with specialized skill and knowledge were used to assist in the evaluation of the company’s discounted cash flow model./s/ pricewaterhouse coopers llp new york, new york february 24, 2022we have served as the company’s auditor since 2008.

critical audit matters the critical audit matters communicated beloware matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicatedto the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and(2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alterin any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical auditmatters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. business combinations as described in note 1 and note 5, the companyacquired three companies during the year ended december 31, 2021. a significant component of each acquisition included identifiable intangibleassets. the preliminary valuation of identifiable intangible assets was conducted using the excess earnings method discount approachand other valuation methods.we identified the business combinations as a criticalaudit matter since the assumptions as described above involve high levels of management judgment and in turn led to a high degree ofauditor judgment, effort and subjectivity in performing procedures and evaluating audit evidence related to management’s valuationmethods and significant assumptions. in addition, the audit effort involved the use of professionals with specialized skill and knowledgeto assist in performing these procedures and evaluating the audit evidence obtained. the primary procedures we performed to addressthis critical audit matter included: - evaluating the appropriateness of management’svaluation methodologies. - assessing the reasonableness of various inputsof the excess earnings method discount approach and other valuation methods. - involving the use of professionals with specializedskill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. goodwill and other indefinite-life intangibles– impairment assessment as described in note 2 and note 7, the companyestimates the fair value of each reporting unit using a combination of a discounted cash flow analysis and market-based valuation methodology.the fair value of the saa s reporting unit was less than the amount reflected in the consolidated balance sheet. accordingly, the companyrecorded a $12.4 million impairment charge on its saa s reporting unit. we identified the impairment assessment as a criticalaudit matter since the assumptions as described above involve high levels of management judgment and in turn led to a high degree ofauditor judgment, effort and subjectivity in performing procedures and evaluating audit evidence related to management’s valuationmethods and significant assumptions. in addition, the audit effort involved the use of professionals with specialized skill and knowledgeto assist in performing these procedures and evaluating the audit evidence obtained. the primary procedures we performed to addressthis critical audit matter included: - evaluating the appropriateness of management’svaluation methodologies. - assessing the reasonableness of various inputsof the discounted cash flow analysis. - involving the use of professionals with specializedskill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. withum smith+brown, pc wehave served as the company’s auditor since 2020.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.acquisition of legg mason, inc. - fair value of indefinite-lived and definite-lived investment management contract intangible assets and one redeemable noncontrolling interest as described in notes 1 and 3 to the consolidated financial statements, in july 2020, the company completed its acquisition of legg mason, inc. for a purchase consideration of $4.7 billion, which resulted in management recording $2.7 billion of indefinite-lived investment management contract intangible assets, $1.1 billion of definite-lived investment management contract intangible assets, and $186.4 million of redeemable noncontrolling interests. fair values of acquired indefinite-lived and definite-lived investment management contract intangible assets are based on the net present value of estimated future cash flows attributable to the contracts, which include significant assumptions about forecasts of the assets under management (“aum”) growth rate, pre-tax profit margin, discount rate, average effective fee rate and effective tax rate. fair values of redeemable noncontrolling interests are determined using discounted cash flows and guideline public company methods, which include significant assumptions about forecasts of the aum growth rate, pre-tax profit margin, discount rate and public company earnings multiples.the principal considerations for our determination that performing procedures relating to the fair value of indefinite-lived and definite-lived investment management contract intangible assets and redeemable noncontrolling interest from the acquisition of legg mason, inc. is a critical audit matter are the significant judgment by management when developing the estimated fair value of indefinite-lived and definite-lived investment management contract intangible assets and redeemable noncontrolling interest; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to (i) the aum growth rate and discount rate assumptions utilized within the net present value of estimated future cash flows for the valuation of the investment management contract intangible assets and redeemable noncontrolling interest and (ii) the public company earnings multiples utilized within the guideline public company method for the valuation of the redeemable noncontrolling interest. in addition, the audit effort involved the use of professionals with specialized skill and knowledge.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the fair value of indefinite-lived and definite-lived investment management contract intangible assets and redeemable noncontrolling interest in the acquisition of legg mason, inc., including controls over development of (i) the aum growth rate and discount rate assumptions utilized within the net present value of estimated future cash flows and (ii) the public company earnings multiples utilized within the guideline public company method. these procedures also included, among others, identifying the acquired contracts by reading the purchase agreement and testing management’s process for estimating the fair value of the acquired indefinite-lived and definite-lived investment management contract intangible assets and 68table of contentsredeemable noncontrolling interest. testing management’s process included (i) evaluating the appropriateness of the methods, (ii) testing the completeness, accuracy, and relevance of underlying data used in the methods, and (iii) evaluating management’s significant assumptions related to the aum growth rate and discount rate for the valuation of the investment management contract intangible assets and redeemable noncontrolling interest, and the public company earnings multiples for the valuation of the redeemable noncontrolling interest. evaluating the reasonableness of the aum growth rate and public company earnings multiples involved considering the past performance of the acquired business, the consistency with external market and industry data and whether these assumptions were consistent with evidence obtained in other areas of the audit. professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the company’s discounted cash flow method and guideline public company method and the reasonableness of the discount rate./s/ pricewaterhouse coopers llp san francisco, california november 20, 2020 we have served as the company’s auditor since 1974.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. acquisition of orbotech, ltd. - valuation of intangible assets as described in notes 1 and 6 to the consolidated financial statements, the company completed the acquisition of orbotech, ltd. (“orbotech”) for consideration of approximately $3.26 billion in 2019, which resulted in approximately $1.55 billion of intangible assets being recorded. management applied significant judgment in estimating the fair value of the intangible assets acquired, which involved the use of significant estimates and assumptions with respect to the revenue growth rates, technology migration curves, discount rates, royalty rates and customer attrition rates. the principal considerations for our determination that performing procedures relating to the valuation of the intangible assets acquired in the acquisition of orbotech is a critical audit matter are there was a high degree of auditor judgment and subjectivity in applying procedures relating to the fair value measurement of intangible assets acquired due to the significant amount of judgment by management when developing the estimate. significant audit effort was required in performing procedures and evaluating the significant assumptions relating to the estimate, including the revenue growth rates and the technology migration curves; and the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of intangible assets and controls over development of the assumptions related to the valuation of the intangible assets. these procedures also included, among others, reading the purchase agreement, and testing management’s process for estimating the fair value of intangible assets. testing management’s process included evaluating the appropriateness of the valuation methods and the reasonableness of significant assumptions, including the revenue growth rates and the technology migration curves for the intangible assets, and using professionals with specialized skill and knowledge to assist with the evaluation. evaluating the reasonableness of the revenue growth rates involved considering the past performance of the acquired business as well as economic and industry forecasts. the technology migration curves were evaluated by considering the revenue attribution between existing technology and in-process research and development based on the assessment of the separation of forecasted future revenue between developed products and new generation products together with the technology carryover rate. 117table of contents uncertain tax positions related to the orbotech acquisition as described in note 13 to the consolidated financial statements, the company has recorded liabilities for gross uncertain tax positions of approximately $60.8 million at june 30, 2019 in connection with acquisitions completed by the company. the majority of the uncertain tax positions were related to the orbotech acquisition. the uncertain tax positions for the orbotech acquisition relate to multiple jurisdictions, including israel, which as further discussed in note 13 is comprised principally of a liability for an uncertain tax position arising from the assessment orbotech received from the israel tax authority (“ita”) with respect to its fiscal years 2012 through 2014. the calculation of the company’s tax liabilities including liabilities associated with the orbotech acquisition, involves dealing with uncertainties in the application of complex tax regulations. the evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. the principal considerations for our determination that performing procedures relating to the uncertain tax positions related to the orbotech acquisition is a critical audit matter are there was significant judgment by management when evaluating uncertain tax positions, including a high degree of estimation uncertainty relative to the application of complex tax regulations and evaluation of factors including changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. this in turn led to significant auditor judgment and effort in performing procedures to evaluate the timely identification and accurate measurement of uncertain tax positions. also, the evaluation of audit evidence available to support the tax liabilities for uncertain tax positions is complex and required significant auditor judgment as the nature of the evidence is often highly subjective, and the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the identification and recognition of the liability for uncertain tax positions, and controls addressing completeness of the uncertain tax positions, as well as controls over measurement of the liability. these procedures also included, among others, (i) testing and evaluating the information used in the calculation of the liability for uncertain tax positions related to the orbotech acquisition, including international filing positions, the related final tax returns and communications between the company and the tax authorities; (ii) testing the calculation of the liability for uncertain tax positions by jurisdiction, including management’s assessment of the technical merits of tax positions related to the orbotech matters and estimates of the amount of tax benefit expected to be sustained for the matters; (iii) testing the completeness of management’s assessment of both the identification of uncertain tax positions and possible outcomes of each uncertain tax position; and (iv) evaluating the status and results of income tax audits with other relevant tax authorities. professionals with specialized skill and knowledge were used to assist in the evaluation of the completeness and measurement of the uncertain tax positions related to the orbotech acquisition, including evaluating the reasonableness of management’s assessment of whether tax positions are more-likely-than-not of being sustained, the amount of potential benefit to be realized, and the application of relevant tax laws./s/ pricewaterhouse coopers llp san jose, california august 16, 2019 we have served as the company’s auditor since 1977.

critical audit matter the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.88board of directors and stockholders union bankshares, inc. and subsidiary page 2allowance for loan losses as described in notes 1, 6 and 7 to the company's consolidated financial statements, the company has a gross loan portfolio of $787.1 million and related allowance for loan losses of $8.3 million as of december 31, 2021. the company's allowance for loan losses is a material and complex estimate requiring significant management judgment in the evaluation of the credit quality and the estimation of inherent losses within the loan portfolio. the level of the allowance for loan losses is based on management’s periodic evaluation of the loan portfolio, credit concentrations, trends in historical loss experience, estimated value of any underlying collateral,specific impaired loans and economic conditions. changes in these assumptions could have a material effect on the company’s financial results. the allowance for loan losses includes a general reserve which is determined based on the results of a quantitative and a qualitative analysis of all loans not measured for impairment at the reporting date.the general component of the allowance for loan losses is based on historical loss experience, adjusted for qualitative factors, for each class of loans with similar risk characteristics. the company considers relevant credit quality indicators for each loan class, stratifies loans by risk rating, and estimates losses for each loan class based upon their nature and risk profile. this process requires significant management judgment in the review of the loan portfolio and assignment of risk ratings based upon the characteristics of loans. the qualitative factors determined for each loan class are subjectively selected by management using certain objective measurements period over period. the qualitative factors are adjusted based on management’s assessment and include changes in loan underwriting, economic and market conditions,portfolio composition, collateral values, delinquencies, lender experience and legal and regulatory issues.auditing these complex judgments and assumptions involves especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters, including the extent of specialized skill or knowledge needed.the primary procedures we performed to address this critical audit matter included:•testing the design of controls relating to management's review of loans, assignment of risk ratings,and consistency of application of accounting policies.•evaluating the reasonableness of assumptions and sources of data used by management informing the qualitative loss factors by performing retrospective review of historic loan loss experience and analyzing data used in developing the assumptions, including assessment of whether there were additional qualitative considerations relevant to the loan portfolio.•evaluating the appropriateness of inputs and factors that the company used in forming the qualitative loss factors and assessing whether such inputs and factors were relevant, reliable, and reasonable for the purpose used.•evaluating the appropriateness of the company's loan risk rating policy and testing the consistency of its application.•evaluating the appropriateness of specific reserves for impaired loans.•verifying the mathematical accuracy and computation of the allowance for loan losses by re-performing or independently calculating significant elements of the allowance for loan losses based on relevant source documents.berry dunn mc neil & parker, llc we have served as the company's auditor since 2009.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.81table of contents revenue — full service clinical contracts — refer to notes 1 and 12 to the consolidated financial statements critical audit matter description the majority of the company’s clinical solutions segment contracts have a single performance obligation because the promise to transfer individual services is not separately identifiable from other promises in the contracts, and therefore, is not distinct. revenue is recognized over time using an input measure of progress. the input measure reflects costs (including investigator payments and pass-through costs) incurred to date relative to total estimated costs to complete (“cost-to-cost measure of progress”). under the cost-to-cost measure of progress methodology, revenue is recorded proportionally to costs incurred. contract costs principally include direct labor, investigator payments, and pass-through costs. the accounting for these contracts involves judgment, particularly as it relates to estimating total contract costs for the performance obligation, which are based on various assumptions to project future outcomes of events that often span several years. given the judgments necessary to estimate total contract costs and profit in order to estimate the amount of revenue to recognize for certain long-term clinical research contracts, auditing such estimates involved especially subjective judgment.how the critical audit matter was addressed in the audit our audit procedures related to management’s estimates of total contract costs and profit to estimate the amount of revenue to recognize for full service clinical research contracts included the following, among others:•we tested the effectiveness of controls over long-term contract revenue, including those over the estimates of total contract costs and profit related to the performance obligation.•we selected a sample of long-term contracts and performed the following:–evaluated whether the contracts were properly included in management’s calculation of long-term contract revenue based on the terms and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward fulfilling the performance obligation.–compared the transaction prices to the consideration expected to be received based on current rights and obligations under the contracts and any contract modifications that were agreed upon with the customers.–tested management’s identification of distinct performance obligations by evaluating whether the underlying services were highly interdependent and interrelated.–tested the accuracy and completeness of the total contract costs incurred to date for the performance obligation.–evaluated the estimates of total contract cost and profit for the performance obligation by: ◦comparing costs incurred to date to the costs management estimated to be incurred to date.◦evaluating management’s ability to achieve the estimates of total contract cost and profit by performing corroborating inquiries with the company’s project managers and project financial analysts, and comparing the estimates to management’s work plans and cost estimates.◦comparing management’s estimates for the selected contracts to historical experience and original budgets, when applicable. 82table of contents–tested the mathematical accuracy of management’s calculation of revenue for the performance obligation. •we evaluated management’s ability to accurately estimate total contract costs and profits by comparing actual costs and profits to management’s historical estimates for performance obligations that have been fulfilled./s/ deloitte & touche llp raleigh, north carolina february 19, 2020we have served as the company’s auditor since 2016.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. evaluation of impairment analysis for the europe, india, middle east, and africa (eimea) and construction adhesives flooring (ca flooring) reporting units as discussed in notes 1 and 5 to the consolidated financial statements, the goodwill balance as of november 30, 2019 was $1,282 million, of which $149 million and $74 million related to the eimea and ca flooring reporting units, respectively. the company performs goodwill impairment testing on an annual basis and whenever events or changes in circumstances indicate that the carrying value of a reporting unit likely exceeds its fair value. we identified the evaluation of the impairment analysis for the eimea and ca flooring reporting units as a critical audit matter. the estimated fair values of the eimea and ca flooring reporting units exceeded their carrying values by 21% and 8%, respectively, indicating a higher risk that the goodwill may be impaired and, therefore, resulted in the application of a high degree of auditor judgment. the expected future cash flows used to determine the fair values of the reporting units were challenging to test. this is due to minor changes to those assumptions having a significant effect on the company’s assessment of the carrying value of the goodwill. the primary procedures we performed to address this critical audit matter included the following. we tested certain internal controls over the company’s goodwill impairment assessment process, including controls related to the determination of the fair values of the reporting units. we also tested internal controls over the company’s related expected future cash flows. we performed sensitivity analyses over the expected future cash flows. this was done to assess the impact of those assumptions on the company’s determination that the fair values of the eimea and ca flooring reporting units exceeded their carrying values. we evaluated the company’s expected future cash flows for the eimea and ca flooring reporting units, by comparing the growth assumptions to forecasted growth rates in the company’s and its peer companies’ analyst reports. we compared the company’s historical cash flow forecasts to actual results to assess the company’s ability to accurately forecast. /s/ kpmg llp we have served as the company’s auditor since 2003.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.revenue — refer to notes 1 and 7 to the financial statements critical audit matter description certain of the company’s revenue contracts with customers include multiple promises (such as hardware systems, software licenses, software and hardware maintenance, and other services). the company typically negotiates contracts with its customers, and while many of these contracts contain standard terms and conditions, certain large enterprises and distributors may have customer specific terms and performance obligations due to the nature of the contracts. pursuant to accounting principles generally accepted in the united states of america the company is required to evaluate whether each performance obligation represents goods and services that are distinct. a good or service is distinct where the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from the company, and is distinct in the context of the contract, where the transfer of the good or service is separately identifiable from other promises in the contract. the evaluation of performance obligations can require significant judgment and could change the amount of revenue recognized in a given period.91 we identified the evaluation of performance obligations in certain large enterprise and distributor contracts as a critical audit matter because of the judgment management makes in evaluating such contracts and the impact of such judgment on the amount of revenue recognized in a given period. this required a high degree of auditor judgment and an increased extent of testing.how the critical audit matter was addressed in the audit our audit procedures related to the company’s evaluation of performance obligations for certain large enterprise and distributor contracts included the following, among others:• we tested the effectiveness of internal controls related to the review of large enterprise and distributor contracts specifically around the review of the terms and conditions and proper evaluation of performance obligations.• we evaluated management’s significant accounting policies related to revenue recognition for reasonableness and compliance with generally accepted accounting principles.• we selected a sample of contracts for large enterprise and distributor customers and performed the following: o obtained and read contract source documents for each selection, including master agreements, amendments, and other documents that were part of the contract. o assessed the terms and conditions in the contract source documents and evaluated the appropriateness of management’s application of their accounting policies in the evaluation of performance obligations. o where applicable, tested the mathematical accuracy of management’s calculations of revenue and the associated allocation of the transaction price to the various performance obligations. /s/ deloitte & touche llp san jose, california june 15, 2020 we have served as the company's auditor since 1995.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 132valuation of servicing related assets description of the matter the company invests in servicing related assets comprising of excess mortgage servicing rights (“emsr”), mortgage servicing rights and mortgage servicing rights financing receivables (collectively “msr”) totaling $411 million and $4,586 million, respectively, as of december 31, 2020 as included in notes 5 and 6 to the consolidated financial statements. the company records servicing related assets at fair value on a recurring basis with changes in fair value recognized in the income statement. these fair value estimates are based on valuation techniques used to estimate future cash flows that incorporate significant unobservable inputs and assumptions which include discount rates, servicing costs, prepayment rates and recapture rates.auditing management’s fair value of the servicing related assets and related changes in fair value is complex because the valuation is driven by significant assumptions that are judgmental and are unobservable in nature. additionally, selecting and applying audit procedures to address the estimation uncertainty involves auditor subjectivity and industry-specific knowledge of servicing related assets including the current market conditions considered by a market participant.how we addressed the matter in our audit we evaluated and tested the company's processes and the design and operating effectiveness of internal controls addressing the valuation of servicing related assets. this included, among others, management’s independent review of significant assumptions including discount rates, servicing costs, prepayment speeds, and recapture rates against historical results and available market information, management’s review of internally developed fair values in comparison to independent fair value ranges obtained from an independent valuation firm to evaluate the reasonableness of the fair values developed by the company and management’s review of model functionality and changes. we also tested management’s controls to validate that the data used in the valuation was complete and accurate. in order to test the valuation of servicing related assets, our audit procedures included testing significant assumptions by comparing them to historical results, current industry, market and economic trends, evaluating the company’s use of the discounted cash flow valuation technique, validating the accuracy and completeness of model objective inputs by agreeing these inputs to the company’s underlying mortgage records and evaluating the competence and objectivity of management’s independent valuation firm engaged to evaluate the reasonableness of the fair values developed by the company. we also performed a sensitivity analysis of the significant assumptions to evaluate the changes in fair value of the servicing related assets resulting from changes in these assumptions. we involved an internal valuation specialist to test management’s assumptions and identify potential sources of contrary information. we evaluated the company’s fair value disclosures included in note 13 for consistency with us gaap.133valuation of non-agency real estate securities description of the matter the company invests in non-agency residential mortgage backed securities (“rmbs”) which are measured at fair value on a recurring basis. as disclosed in note 8 to the consolidated financial statements, the company determined that the fair value of these non-agency rmbs approximates $1,181 million, as of december 31, 2020. as explained in note 13 to the consolidated financial statements, the company utilizes pricing service quotations or broker quotations obtained from third-party pricing services and brokers engaged by new residential (collectively “valuation providers”) in the fair value measurement of these level 3 assets. significant unobservable inputs are used in these fair value measurements which include discount rates, expected prepayment rates, expected default rates and expected loss severities. auditing management’s fair value of the non-agency rmbs is complex because determining the fair value is judgmental and involves using assumptions that are not directly observable in the market, including discount rates, expected prepayment rates, expected default rates and expected loss severities. additionally, selecting and applying audit procedures to address the estimation uncertainty involves auditor subjectivity and industry-specific knowledge of non-agency rmbs including the current market conditions considered by a market participant.how we addressed the matter in our audit we evaluated and tested the company's processes and the design and operating effectiveness of internal controls addressing the valuation of non-agency rmbs. this included controls over the review of valuation methodologies used by the valuation providers, management’s fair value analysis applied to select one of the multiple quotes obtained from the valuation providers which is believed to most accurately reflect fair value and management’s evaluation of the pricing information obtained from the valuation providers. as management used valuation providers to develop its fair value estimate, our audit procedures included selecting a sample of securities to determine whether the final price provided by the valuation provider agrees to the price used by management. with the support of an internal valuation specialist, we independently developed a range of fair value for a sample of securities and compared management’s estimates to our ranges. we developed the ranges of fair value by using a cash flow model and inputting cash flow and yield assumptions based on our independently obtained information. we also considered market transaction data for similar securities, if available, to develop our independent ranges to be compared to management’s fair value estimate. we evaluated the company’s fair value disclosures included in note 13 for consistency with us gaap.134valuation of residential mortgage loans (rm ls)description of the matter the company holds acquired conforming and nonconforming mortgage loans which are measured at fair value on a recurring basis or, for those measured at the lower of cost or fair value, are measured at fair value on a non-recurring basis as described in note 9 to the consolidated financial statements. as included in note 13 to the consolidated financial statements, rm ls with a carrying value of $2,830 million as of december 31, 2020 are valued using internal pricing models to forecast loan level cash flows using subjective inputs such as default rates, prepayments speeds and discount rates. as the internal pricing model is based on these subjective, unobservable inputs, the company classifies these valuations as level 3 in the fair value hierarchy. auditing management’s fair value of the rm ls classified as level 3 in the fair value hierarchy was complex because valuation is driven by significant assumptions that are judgmental and are unobservable in nature. additionally, selecting and applying audit procedures to address the estimation uncertainty involves auditor subjectivity and industry-specific knowledge of rm ls including the current market conditions considered by a market participant. how we addressed the matter in our audit we evaluated and tested the company's processes and the design and operating effectiveness of internal controls addressing the valuation of rm ls. this included, among others, management’s independent review of significant assumptions including default rates, prepayments speeds, loss severities and discount rates against historical results and available market information, management’s review of internally developed fair values in comparison to independent fair value marks obtained from third parties to evaluate the reasonableness of the fair values developed by the company, and management’s review of model functionality and changes. we also tested management’s controls to validate that the data used in the valuation was complete and accurate. in order to test the valuation of rm ls, our audit procedures included, among others, testing significant assumptions by comparing to historical results, current industry, market and economic trends, evaluating the company’s use of the discounted cash flow valuation technique and validating the accuracy and completeness of model objective inputs. with the support of an internal valuation specialist, we independently developed a range of fair value for a sample of loan pools and compared management’s estimates to our ranges. we developed the ranges based on collateral characteristics of the pools selected for testing and consideration of market transaction data for similar collateral, where available. we evaluated the company’s fair value disclosures included in note 13 for consistency with us gaap./s/ ernst & young llp we have served as the company’s auditor since 2012.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. uncertain tax positions description of the matter as described in notes 2 and 14, the company establishes reserves for uncertain tax positions for positions that are taken on their income tax returns that might not be sustained upon examination by the taxing authorities. at december 31, 2019, the company has recorded approximately $217 million relating to uncertain tax positions.in determining whether an uncertain tax position exists, the company determines, based solely on its technical merits, whether the tax position is more likely than not to be sustained upon examination, and if so, a tax benefit is measured on a cumulative probability basis that is more likely than not to be realized upon the ultimate settlement. the company identifies its certain and uncertain tax positions and then evaluates the recognition and measurement steps to determine the amount that should be recognized. the company then evaluates uncertain tax positions in subsequent periods for recognition, de-recognition or re-measurement if changes have occurred, or when effective settlement or expiration of the statute of limitations occurs.58table of contents auditing the uncertain tax positions is complex because of the judgmental nature of the tax accruals and various other tax return positions that might not be sustained upon review by taxing authorities. the company files tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world due to its complex global footprint. taxing jurisdictions significant to aptiv include china, barbados, luxembourg, germany, mexico, the u.s., ireland, south korea and the u.k.how we addressed the matter in our audit we obtained an understanding, evaluated the design, and tested the operating effectiveness of controls related to the recognition, measurement and the evaluation of changes in uncertain tax positions. this included testing controls over management’s review of the tax positions, their evaluation of whether they met the measurement threshold and then recalculating the amounts recognized based upon a cumulative probability assessment performed by management.our audit procedures to test the company’s uncertain tax positions included, among others, involvement of our transfer pricing professionals to evaluate the third-party transfer pricing studies obtained by the company and assessing the company’s correspondence with the relevant tax authorities. we analyzed the company’s assumptions and data used to determine the amount of tax benefit to recognize and tested the accuracy of the calculations. our testing also included the evaluation of the ongoing positions and consideration of changes, the recording of penalties and interest and the ultimate settlement and payment of certain tax matters. revenue recognition description of the matter as described in notes 2 and 26, aptiv occasionally enters into pricing agreements with its customers that provide for price reductions, some of which are conditional upon achieving certain joint cost saving targets. in addition, from time to time, aptiv makes payments to customers in conjunction with ongoing business. revenue is recognized based on the agreed-upon price at the time of shipment, and sales incentives, allowances and certain customer payments are recognized as a reduction to revenue at the time of the commitment to provide such incentives or make these payments. certain other customer payments or upfront fees are considered to be a cost to obtain a contract as they are directly attributable to a contract, are incremental and management expects the payments to be recoverable. in these cases, the customer payment is capitalized and amortized to revenue based on the transfer of goods and services to the customer for which the upfront payment relates. as of december 31, 2019, aptiv has recorded $99 million related to these capitalized upfront payments.auditing the accounting for and completeness of arrangements containing elements such as sales incentives, allowances and customer payments, including the appropriate timing and presentation of adjustments to revenue as well as costs to obtain a contract is judgmental due to the unique facts and circumstances involved in each revenue arrangement, as well as on-going commercial negotiations with customers.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the review of customer contracts. this included testing controls over the company’s process to identify and evaluate customer contracts that contain sales incentives, allowances and customer payments that impact revenue recognition.our audit procedures to test the completeness of the company’s identification of such contracts included, among others, interviewing sales representatives who are responsible for negotiations with customers and testing cash payments to customers. to test management’s assessment of customer contracts containing sales incentives, allowances and customer payments, our procedures included, among others, selecting a sample of customer agreements, obtaining and reviewing source documentation, including master agreements, and other documents that were part of the agreement, and evaluating the contract terms to determine the appropriateness of the accounting treatment./s/ ernst & young llp we have served as the company’s auditor since 2006d

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.valuation of incurred but not paid fee-for-service claims description of the matter as of december 31, 2020, the company’s liability for fee-for-service claims incurred but not paid (“ibnp”), excluding ibnp acquired from the magellan complete care (“mcc”) acquisition, comprised $1,647 million of the $2,696 million of medical claims and benefits payable. as discussed in note 10 to the consolidated financial statements, the company’s ibnp liability is determined using actuarial methods that include a number of factors and assumptions, including completion factors, which seek to measure the cumulative percentage of claims expense that will have been paid for a given month of service as of the reporting date, based on historical payment patterns, and assumed health care cost trend factors, which represent an estimate of claims expense based on recent claims expense levels and healthcare cost levels. there is significant uncertainty inherent in determining management’s best estimate of completion and trend factors, which are used to calculate actuarial estimates of incurred but not paid claims.molina healthcare, inc. 2020 form 10-k | 94auditing management’s best estimate of the ibnp liability was complex and required the involvement of our actuarial specialists due to the highly judgmental nature of completion and trend factor assumptions used in the valuation process. these assumptions have a significant effect on the valuation of the ibnp liability.how we addressed the matter in our audit we obtained an understanding, evaluated the design, and tested the operating effectiveness of the company’s controls over the process for estimating the ibnp liability. this included testing management review controls over completion and trend factor assumptions, and management’s review and approval of actuarial methods used to calculate ibnp liability, including the data inputs and outputs of those models.to test ibnp liability, our audit procedures included, among others, testing the completeness and accuracy of data used in the calculation by testing reconciliations of underlying claims and membership data recorded in source systems to the actuarial reserving calculations, and comparing a sample of claims to source documentation. with the assistance of ey actuarial specialists, we evaluated the company’s selection and weighting of actuarial methods by comparing the weightings used in the current estimate to those used in prior periods and those used in the industry for the specific types of insurance. to evaluate significant assumptions used by management in the actuarial methods, we compared assumptions to current and historical claims trends, to those used historically and to current industry benchmarks. we also compared management’s recorded ibnp liability to a range of reasonable ibnp estimates calculated independently by our ey actuarial specialists. additionally, we performed a review of the prior period estimates using subsequent claims development, and we reviewed and evaluated management’s disclosures surrounding fee-for-service claims ibnp.valuation of intangibles description of the matter during 2020, the company completed its acquisition of mcc for net consideration of $1,037 million, as disclosed in note 4 to the consolidated financial statements. the transaction was accounted for as a business combination using the acquisition method.auditing the company’s accounting for its acquisition of mcc was complex due to the significant estimation uncertainty in the company’s determination of the fair value of acquired contract rights which comprised $171 million of the acquired identified intangible assets of $191 million. the company used a discounted cash flow model to measure contract rights. the significant estimation uncertainty was primarily due to the sensitivity of the fair value to underlying assumptions, specifically changes in forecasted operating margins, and the weighted average cost of capital, which are affected by expectations about future market or economic conditions.how we addressed the matter in our audit we obtained an understanding, evaluated the design, and tested the operating effectiveness of the company’s controls over its accounting for acquisitions. this included testing management review controls over the estimation process supporting the recognition and measurement of contract rights. we also tested management’s review of assumptions used in the valuation models.to test the estimated fair value of contract rights, our audit procedures included, among others, evaluating the company's selection of the valuation methodology and significant assumptions used by the company's valuation specialist, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. we involved our valuation specialists to assist with our evaluation of the methodology used by the company and significant assumptions included in the fair value estimates. we compared the significant assumptions used by management to current industry and economic trends, changes to the company’s business, markets, membership retention and growth rates, and other factors. additionally, we reviewed and evaluated management’s disclosures surrounding determination of the intangible assets./s/ ernst & young llp we have served as the company’s auditor since 2000.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.f-3table of contents allowance for loan losses - notes receivable description of the matter at december 31, 2020, the company’s notes receivable portfolio totaled $135.4 million, net of allowances of $2.6 million. as discussed in notes 2 and 6 to the consolidated financial statements, management estimates the allowance for loan losses on outstanding notes receivable based primarily upon relevant historical loan loss data sets, the forecast for macroeconomic conditions, loan-to-value of the underlying project, remaining contractual loan term, and other relevant loan-specific factors. for loans experiencing financial difficulty as of the measurement date, the company recognizes expected credit losses calculated as the difference between the amortized cost basis of the financial asset and the estimated fair value of the collateral, which includes an estimation of the projected sales proceeds from the sale of the underlying property.auditing management’s estimate of the allowance for loan losses was complex and highly judgmental due to the significant estimation required to determine the estimated fair value of the collateral. in particular, the estimated fair value of the collateral was highly sensitive to significant assumptions based on management’s expectations about future real estate market or economic conditions and the projected operating results of the property.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the allowance for loan losses process. for example, we tested controls over management’s review of the estimated allowance, the significant assumptions, and the data used to calculate the estimated fair value of the collateral.to test the allowance for loan losses, we performed audit procedures that included, among others, assessing methodologies used and testing the significant assumptions and underlying data used by the company in calculating the estimated fair value of the collateral. we compared the significant assumptions used by management to external evidence, including comparable market capitalization rates and recent market activity of similar property transactions. we tested the projected operating results of properties by comparing inputs and assumptions to executed or draft lease agreements and operating expenses incurred at similar operating properties owned by the company. we performed sensitivity analyses of significant assumptions to evaluate the changes to the estimated fair value of the collateral that would result from changes in the assumptions. we also assessed the historical accuracy of management’s estimates.general contracting revenue recognition description of the matter for the year ended december 31, 2020, the company’s general contracting revenues totaled approximately $217.1 million. as described in notes 2 and 7 to the consolidated financial statements, for each construction contract, the company estimates its progress in satisfying performance obligations based on the proportion of incurred costs to total estimated costs at completion. the company also estimates the total transaction price, including variable components, for each construction contract. auditing the company’s measurement of general contracting revenue was challenging due to the significant estimation required to determine the estimated total costs at completion and variable consideration. estimated costs at completion are affected by management’s forecasts of anticipated costs to be incurred and contingency reserves for exposures related to unknown costs, such as design deficiencies and subcontractor defaults. estimated variable consideration is affected by claims and unapproved change orders, which may result from changes in the scope of the contract.f-4table of contents how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of the company’s controls over the measurement of general contracting revenue. for example, we tested controls over management’s review and monitoring of the variable consideration calculation and the underlying assumptions related to estimates of costs at completion.to test general contracting revenue recognition, our audit procedures included, among others, evaluating the estimates discussed above and testing the completeness and accuracy of the underlying data used by the company to calculate variable consideration and total estimated costs at completion. for example, we tested variable consideration by inspecting subsequently executed change orders, reviewing legally enforceable terms of the contracts or confirming the value of executed change orders directly with the customers. we also confirmed directly with customers specific contract details, including the current and original contract value as well as the estimated percentage of completion. we tested the estimated costs at completion by comparing management’s cost estimates of materials, labor, and subcontractors to third-party evidence, such as subcontractor bids. in addition, we visited property sites, conducted interviews with the company’s project management personnel, and involved our engineering specialists to assist in testing the company’s estimated costs at completion. we also assessed the historical accuracy of management’s estimates of variable consideration and estimated costs at completion through retrospective review of actual gross-margins of completed projects compared to the anticipated gross margins during the projects.accounting for acquisition of operating properties description of the matter during 2020, the company completed three operating property acquisitions for a total purchase price of $188.8 million as described in notes 2 and 5 to the consolidated financial statements. these transactions were accounted for as asset acquisitions.auditing the company's accounting for these acquisitions was challenging due to the significant estimation required by management to determine the fair values of the acquired assets used to allocate costs of the acquisitions on a relative fair value basis. the significant estimation was primarily due to the sensitivity of the respective fair values to underlying assumptions. the significant assumptions used to estimate the values of the tangible and intangible assets included the replacement cost of the properties, total lease-up time and lost rental revenues during such time, market rents, estimated future cash flows and other valuation assumptions. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s acquisition and purchase price allocation process, including controls over management’s review of the significant assumptions described above. for example, we tested controls over management’s review of the valuation methodology, the purchase price allocation, and the significant assumptions used. to test the costs allocated to the tangible and intangible assets, we involved our valuation specialists and performed audit procedures that included, among others, evaluating the company’s valuation methodologies, testing the significant assumptions described above and testing the completeness and accuracy of the underlying data. for example, we compared the significant assumptions to observable market data, including other properties within the same submarkets and to historical costs incurred by the company in developing and constructing similar assets. we also performed sensitivity analyses of the significant assumptions to evaluate the change in fair values resulting from the changes in assumptions. in addition, we compared the company’s estimated fair values of acquired assets to independent estimates developed by our valuation specialist. /s/ ernst & young llp we have served as the company’s auditor since 2012.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.revenue recognition–refer to note 1 to the consolidated financial statements critical audit matter description the company recognizes revenue as it fulfills their performance obligations and transfers control of products to its customers. for products that have no alternative use and for which the company has an enforceable right to payment (including a reasonable profit) throughout the production process, revenue is recognized over time. in general, a majority of the company’s revenue for aero/hs products and automotive extrusions are recognized over time, with the revenue for the remainder of its products recognized at a point in time. for contracts recognized over time, control transfer occurs incrementally during the company’s production process as progress is made on fulfilling the performance obligation. the company uses the input method of determining the progress, capturing direct costs beginning at the point that billet or cast ingot is introduced into production at either the extrusion phase or the rolling phase, respectively. for products in production, the company recognizes revenue using the cost incurred to date plus an estimate of reasonable margin. as of december 31, 2019, net sales were $1,514.1 million, of which $647.2 million was recognized over time.given the volume of contracts that are recognized over time and the complexity of the determination of over time revenue, we identified revenue for over time contracts as a critical audit matter.how the critical audit matter was addressed in the audit our audit procedures related to revenue recognized over time, included the following, among others:•we tested management’s controls over revenue recognized over time, including those over cost incurred to date and estimates of reasonable margin.•we tested the mathematical accuracy of management’s calculation of revenue recognized over time.•we selected a sample of contracts with customers and performed the following:◦we evaluated whether the contracts were properly included in management’s calculation of revenue recognized over time based on the terms and conditions of each contract.◦we tested that control transfer occurred as progress was made toward fulfilling the performance obligation. ◦we evaluated the estimates of reasonable margin by developing a range of independent estimates and comparing our estimates to those used by management.•we evaluated management’s ability to accurately estimate reasonable margins by comparing actual margins to management’s historical estimates. 40report of independent registered public accounting firm (continued)environmental contingencies–refer to notes 1 and 10 to the consolidated financial statements critical audit matter description the company is subject to a number of environmental laws and regulations, to potential fines or penalties assessed for alleged breaches of such laws and regulations and to potential claims based upon such laws and regulations. the company records an environmental loss contingency whenever a contingency is probable and reasonably estimable.at december 31, 2019, the company’s $17.0 million accrual for expected environmental costs is included in other accrued liabilities and long-term liabilities and represents the company’s undiscounted estimate of costs reasonably expected to be incurred based on presently enacted laws and regulations, existing requirements, currently available facts, existing technology and its assessment of the likely remediation actions to be taken.an inherent risk exists that actual costs could significantly exceed accrued amounts, and expenditures could occur sooner than anticipated, which could adversely affect the company’s financial position, results of operations and cash flows. auditing management’s estimate of the costs reasonably expected to be incurred for environmental contingencies involved especially subjective judgment and an increased extent of audit procedures, including the need to involve environmental specialists.how the critical audit matter was addressed in the audit our audit procedures related to management’s estimate of the costs reasonably expected to be incurred for environmental contingencies included the following, among others:•we tested management’s controls over environmental contingencies, including controls over the estimates of costs expected to be incurred.•we evaluated management’s ability to accurately estimate the costs expected to be incurred by comparing actual costs incurred to historical estimates.•with the assistance of our environmental specialists, we evaluated the reasonableness of management’s estimates of costs reasonably expected to be incurred by comparing the estimates to:◦information obtained directly from the company’s external environmental specialists.◦communications and feasibility studies the company received from its regulators and other environmental associations, including washington state department of ecology and ohio environmental protection agency.◦information obtained directly from public domain searches.◦actual costs incurred to date and the progress of management’s remediation activities.goodwill–imperial machine and tool co. (“imt”) reporting unit–refer to notes 1 and 4 to the consolidated financial statements critical audit matter description the company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. the company used the market approach and discounted cash flow model to estimate fair value, which requires management to make significant estimates and assumptions related to discount rates and forecasts of future revenues and operating margins. changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both. during the fourth quarter of fiscal 2019, the company determined that the fair value of the imt reporting unit, acquired on september 19, 2018, was lower than its carrying value, which resulted in a write-off of the total $25.2 million goodwill balance for the year ended december 31, 2019.given the significant judgments made by management to estimate the fair value of imt, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of the discount rate and forecasts of future revenue and operating margins of imt required a high degree of auditor judgment and increased extent of effort, including the need to involve our fair value specialists.how the critical audit matter was addressed in the audit our audit procedures applied to the discount rate and forecasts of future revenue and operating margins used by management to estimate the fair value of imt included the following, among others: 41report of independent registered public accounting firm (continued)•we tested management’s controls over its impairment evaluation, including those over the determination of the fair value of imt, such as controls related to management’s selection of the discount rate and forecasts of future revenue and operating margins.•we assessed the reasonableness of management’s forecasts of future revenue and operating margins by comparing the projections to certain peer companies, third-party industry forecasts, and internal communications to management and the board of directors.•with the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate utilized, including testing the source information underlying the determination of the discount rate, testing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing those to the discount rate selected by management.•we evaluated management’s ability to accurately forecast future revenue and operating margins by comparing actual results to management’s historical forecasts./s/ deloitte & touche llp costa mesa, california february 25, 2020 we have served as the company's auditor since 2002.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. calculation of variable consideration related to rebates as described further in note 1 to the financial statements, the transaction price of the company’s prescription products is variable as it is calculated net of estimated product returns, chargebacks, rebates, coupons, discounts and wholesaler fees. we identified the calculation of variable consideration related to rebates as a critical audit matter.f-2 the principal consideration for our determination that the calculation of variable consideration related to rebates was a critical audit matter is that auditing the estimation of variable consideration for rebates requires significant judgement and the amounts are material to the financial statements taken as a whole. these estimates require the consideration of the estimated level of inventory in the distribution channel, average rebate percentage, and expected insurance adjudication rate, all of which are key assumptions and have estimation uncertainty.our audit procedures related to testing the calculation of variable consideration related to rebates included the following, among others: •we evaluated the design and tested the operating effectiveness of controls over management’s calculation and review of variable consideration related to rebates by verifying management’s controls over the completeness of the input data, mathematical accuracy of the calculations and evaluating the reasonableness of the estimated level of inventory in the distribution channel, average rebate percentage, and expected insurance adjudication rate. •we tested management’s rebate estimates by reviewing subsequent events or transactions. our procedures included reviewing subsequent information related to rebate settlements. we also evaluated the average rebates by vouching a sample of transactions settled during the year to source documentation, agreeing rebate percentages to underlying contracts, and we performed a sensitivity analysis that considered the estimated level of inventory in the distribution channel, average rebate percentage and expected adjudication rate. /s/ grant thornton llp we have served as the company’s auditor since 2015.

critical audit matters thecritical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicatedor required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financialstatements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit mattersdoes not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical auditmatters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. stock issued for services duringthe year ended december 31, 2021, the company recognized $187,963 in expenses related to stock issued for services. as discussed in notes3 and 4, the company has issued stock to management under an employment agreement and periodically issued other shares for services.shares issued for services are recorded at their fair value on their measurement dates based upon prices on otc markets. ouraudit procedures to evaluate the appropriateness and accuracy of the accounting and fair value determined by management included reviewingthe agreements and selected documentation supporting the issuances as well as recomputing the valuations made by management by examiningthe prices from third party sources. /s/ boyle cpa, llc we have served as the company’s auditor since 2020

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements, and (2) involved our especially challenging, subjective or complex judgments. the communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.33valuation of insurance reserves description of the matter at may 31, 2020, the company's insurance reserve was $165.4 million. as described in note 1 to the company’s consolidated financial statements, the company’s insurance reserve represents the estimated ultimate cost of all asserted and unasserted claims primarily related to workers' compensation, auto liability and other general liability exposure. the insurance reserve is estimated through actuarial procedures and by using industry assumptions, adjusted for company specific expectations based on claims history. auditing the company's estimate of the insurance reserve is judgmental and complex due to the significant estimation uncertainty in the value of asserted claims including their loss development as well as the potential value of unasserted claims, which are developed with the assistance of a third-party actuarial specialist. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the company’s insurance reserve. this includes internal controls over the claims activity and actuarial methods used to establish the insurance reserve. specifically, we tested internal controls related to management’s review of data provided to the actuary, validation of claim activity and review of actuarial methods.to test the insurance reserve, our audit procedures included, among others, assessing the methodologies used to estimate the insurance reserve and testing the completeness and accuracy of the underlying claims data, vouching payments made to third parties and testing the mathematical accuracy of the actuarially determined insurance reserve. furthermore, we involved our actuarial specialists to assist in evaluating the methodologies used by management to determine the insurance reserve and comparing the company’s recorded insurance reserve to a range developed based on independently selected actuarial methodologies./s/ ernst & young llp we have served as the company's auditor since 1968c

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.valuation of accounts receivable as described in notes 1 and 10 to the consolidated financial statements, the company reports net patient service revenue at the estimated net realizable amounts from patients and third-party payers and others for services rendered. the company has agreements with third-party payers that provide for payments to the company at amounts different from established rates. payment arrangements include rates per discharge, reimbursed costs, discounted charges and per diem payments. estimates of contractual allowances, which represent explicit price concessions, under managed care plans are based upon the payment terms specified in the related contractual agreements. management estimates medicare and medicaid revenues using the latest available financial information, patient utilization data, government provided data and in accordance with applicable medicare and medicaid payment rules and regulations. management monitors the historical collection rates, as well as changes in applicable laws, rules and regulations and contract terms, to assure that provisions are made using the most accurate information available. in addition to explicit price concessions, management estimates revenue adjustments for implicit price concessions based on general factors such as payer mix, the aging of the receivables and historical collection experience. management routinely reviews accounts receivable balances in conjunction with these factors and other economic conditions which might ultimately affect the collectability of the patient accounts and make adjustments to the allowances as warranted. as of december 31, 2019, accounts receivable, net was $1.56 billion. the principal considerations for our determination that performing procedures relating to the valuation of accounts receivable is a critical audit matter are there was significant judgment by management in estimating net accounts receivable, specifically as it relates to the estimation of implicit price concessions. this in turn led to significant auditor judgment and effort to assess the audit evidence obtained related to the estimation of implicit price concessions. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the valuation of accounts receivable, including controls over management’s valuation approach, assumptions and data used to estimate the explicit and implicit price concessions. these procedures also included, among others, i) evaluating management’s process for developing the estimate for implicit price concessions, as well as the relevance and use of the historical billing and collection data as an input to the valuation approach, ii) testing the accuracy of a sample of revenue transactions and a sample of cash collections from the historical billing data and historical collection data used in management’s estimation of implicit price concessions, and iii) evaluating the historical accuracy of management’s process for developing the estimate of the amount which will ultimately be collected by comparing actual cash collections to the previously recorded accounts receivable. /s/ pricewaterhouse coopers llp philadelphia, pennsylvania february 26, 2020we have served as the company’s auditor since 2007.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. revenue recognition – total expected costs for performance obligations satisfied over time as described in notes 1 and 3 to the consolidated financial statements, $2,378 million of the company’s total revenues for the year ended december 31, 2021 was generated from the installation segment. revenue is recognized for the installation segment over time as the related performance obligation is satisfied with respect to each particular order within a given customer’s contract. progress toward complete satisfaction of the performance obligation is measured using a cost-to-cost measure of progress method. the cost input is based on the amount of material installed at that customer’s location and the associated labor costs, as compared to the total expected cost for the particular order. the total expected cost is a significant estimate in the revenue recognition process, requires judgment, and is subject to variability throughout the duration of the contract as a result of contract modifications and other circumstances impacting job completion. revenue is recognized over time as the customer is able to receive and utilize the benefits provided. the principal considerations for our determination that performing procedures relating to revenue recognition – total expected costs for performance obligations satisfied over time is a critical audit matter are (i) the significant judgment by management when determining the total expected costs for a customer contract and (ii) a high degree of auditor judgment and effort in performing procedures and evaluating management’s significant assumptions related to the estimated amount of material installed and the associated labor costs.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the estimation of total expected costs for performance obligations satisfied over time. the procedures also included, among others (i) testing management’s process for determining the total expected costs for a sample of customer contracts and (ii) evaluating the reasonableness of significant assumptions related to the estimated amount of material to be installed and the associated 36 table of contentslabor costs used by management and considering the factors that can affect the accuracy of those estimates. evaluating the reasonableness of significant assumptions used involved assessing management’s ability to reasonably estimate total expected costs for customer contracts by (i) performing a comparison of the originally estimated and actual costs incurred on completed contracts and (ii) evaluating the timely identification of circumstances that may warrant a modification to total expected cost, including actual costs in excess of estimates. valuation of the customer relationships intangible asset - acquisition of distribution international as described in notes 1 and 15 to the consolidated financial statements, on october 15, 2021, the company acquired distribution international for $1,031 million in cash, which resulted in recording of a customer relationships intangible asset valued at $434 million. the fair value for the customer relationships intangible asset was determined by management using the multi-period excess earnings method under the income approach. assumptions used in determining the fair value of the customer relationships intangible asset included forecasted revenue growth rate, customer attrition rate, and discount rate.the principal considerations for our determination that performing procedures relating to the valuation of the customer relationships intangible asset from the distribution international acquisition is a critical audit matter are (i) a high degree of auditor judgment and subjectivity in performing procedures relating to the fair value of the customer relationships intangible asset due to the significant judgment by management when developing the estimate; (ii) the significant audit effort in evaluating the significant assumptions related to forecasted revenue growth rate, customer attrition rate, and discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationships intangible asset and controls over the development of significant assumptions related to forecasted revenue growth rate, customer attrition rate, and discount rate. these procedures also included, among others (i) reading the purchase agreement; (ii) testing management’s process for estimating the fair value of the customer relationships intangible asset; (iii) evaluating the appropriateness of the multi-period excess earnings method; (iv) testing the completeness and accuracy of the underlying data provided by management; and (v) evaluating the reasonableness of the significant assumptions used by management related to forecasted revenue growth rate, customer attrition rate, and discount rate. evaluating management’s assumptions related to forecasted revenue growth rate and customer attrition rate involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of distribution international; (ii) consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the multi-period excess earnings method and the discount rate assumption. /s/ pricewaterhouse coopers llp tampa, florida february 22, 2022we have served as the company’s auditor since 2015.

critical audit matters the critical audit matters communicated beloware matters arising from the current period audit of the financial statements that were communicated or required to be communicated tothe audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved ourespecially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinionon the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinionson the critical audit matters or on the accounts or disclosures to which they relate. business combinations – valuation of acquired intangible assets as described in note 5 to the consolidated financialstatements, on august 5, 2021, the company acquired american robotics, inc. for purchase consideration of approximately $69.3 million.the company accounted for the acquisition in accordance with asc topic 805, business combinations, which required the company toexercise judgment and make estimates and assumptions based on available information regarding the fair values of intangible assets asof the date of the acquisition. we identified the fair values of certain identifiableintangible assets, primarily developed technology, trademarks and faa waiver, as critical audit matters. the principal considerationsfor our determination included the following: (i) changes in the key assumptions could have a significant impact on the fair value ofthe intangible assets acquired, (ii) subjectivity and judgment required to determine significant unobservable inputs and assumptions utilizedby the company in determining the fair value of the intangible assets, specifically projected revenue growth rates, expected cash flow,royalty rates and discount rates and (iii) the appropriateness of the use of various valuation models to determine the fair value of thedeveloped technology, trademarks and faa waiver acquired. auditing these factors involved especially challenging and subjective auditorjudgment due to the nature and extent of audit effort required to address the matters, including the extent of specialized skill or knowledgeneeded. the primary procedures we performed to addressthis critical audit matter included: ●assessing the reasonableness of projected revenue growth rates and expected cash flow through: (i) evaluatingthe company’s objectives, strategies, and related business risks, (ii) evaluating consistency with available industry or other third-partyreports or data, and (iii) evaluating the company’s relevant evidence and analysis for the significant assumptions. ●utilizing personnel with specialized knowledge and skill with valuations to (i) assess the reasonablenessof royalty rates and discount rates utilized in the various valuation models and (ii) assess the appropriateness of the various valuationmodels utilized by management to determine the fair values of the developed technology, trademarks and faa waiver acquired. /s/

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.94evaluation of inventories for impairment description of the matter as of november 30, 2020, the company’s real estate inventories were $3.90 billion. as more fully described in note 7 to the consolidated financial statements, the company assesses each community or land parcel to identify indicators of potential impairment. when an indicator of potential impairment is identified, the company evaluates the recoverability of the asset based on its projected undiscounted future cash flows. when the carrying value of the asset is greater than its projected undiscounted future cash flows, the company estimates the fair value of the asset based on its projected discounted cash flows and records an impairment charge. inputs used in the company’s impairment assessments consider then-current market conditions and trends in the market in which the asset is located as well as factors known at the time the cash flows are calculated. these factors may include recent trends in orders, backlog, cancellation rates and volume of homes delivered, as well as expectations related to: future product offerings; market supply and demand, including estimated average selling prices and related price appreciation; land development and home construction costs to be incurred; and discount rates reflecting the inherent risk associated with the asset.auditing the company’s impairment assessment for real estate inventories involves a high degree of auditor judgment in evaluating management’s estimates of future cash flows and fair values used to evaluate recoverability or measure impairment for projects with identified impairment indicators. management’s estimates that support the projected future cash flows and fair values are based on subjective assumptions about expected future sales activity, risk specific to the asset and conditions in the market in which the asset is located.how we addressed the matter in our audit we obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the company’s real estate inventory impairment assessment process. for example, we tested controls over the company’s review of significant data and assumptions used in the company’s estimation of cash flows and fair value analysis for projects with identified impairment indicators.to test the company’s real estate inventory impairment assessment, our audit procedures included, among others, evaluating the significant judgments, data and assumptions used to estimate future cash flows and fair values for assets with identified indicators of impairment. these procedures included comparison of such data and assumptions to the company’s accounting records and market data, recalculation of the company’s estimates and searching for evidence contrary to such judgments and assumptions. we also involved our real estate valuation specialists to assist in evaluating the key assumptions and methodologies used in the impairment assessments for certain projects, including assumptions related to average selling prices, expected home construction costs, and discount rate assumptions used to estimate fair values.95self-insurance liabilities and recoveries description of the matter at november 30, 2020, the company’s self-insurance liability was $194.2 million and receivables for estimated probable insurance and other recoveries related to self-insurance claims totaled $60.0 million. as disclosed in note 17 to the consolidated financial statements, the company’s self-insurance liability for construction defects is based on an analysis prepared by a third-party actuary that uses historical claim and expense data as well as industry data to estimate the cost of all unpaid losses, including estimates related to claims incurred but not yet reported. key assumptions used in developing these estimates include claim frequencies, severities and resolution patterns, which can occur over an extended period of time. self-insurance recoveries are principally based on actuarially determined amounts and consider the claim cost estimates described above, applicable insurance policy coverage limits, historical recovery rates, and other factors.auditing the company’s self-insurance liability and related recoveries is complex and highly judgmental due to the complexity of the actuarial methods used to estimate the losses and related recoveries and degree of subjective judgment required to assess the underlying assumptions, which required us to involve our actuarial specialists. these estimates are subject to variability due to the length of time between the delivery of a home to a homebuyer and when a construction defect claim is made and ultimately resolved; uncertainties regarding such claims relative to the markets and types of products built; and legal or regulatory actions and interpretations, among other factors.how we addressed the matter in our audit we obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the company’s self-insurance liability and recoveries estimation process including controls over the data and assumptions used in the analysis.to test the company’s self-insurance liability and related recoveries, our audit procedures included, among others, testing the completeness and accuracy of the underlying claims and recovery data utilized by the company’s third-party actuary, testing the existence and terms of third-party insurance policies, and involving our actuarial specialist to assist in our evaluation of the methodologies and assumptions applied by management’s third-party actuary. additionally, we compared the company’s recorded self-insurance liability and related recoveries to estimated ranges which our actuarial specialist developed based on independently selected assumptions./s/ ernst & young llp we have served as the company’s auditor since 1991.

critical audit matter the criticalaudit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicatedor required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to thefinancial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of criticalaudit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicatingthe critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures towhich it relates. oil and gas properties, depletion and amortization and impairment of long-lived assets - refer to note 1 to the financial statements critical audit matter description as described in note 1 to the financialstatements, oil and gas properties are accounted for using the successful efforts method. depletion and amortization of the costof proved oil and gas properties are calculated using the units-of-production method. proved developed reserves are used as thebase for depleting capitalized costs associated with successful exploratory well costs, development costs and related facilities,other than offshore platforms. the sum of proved developed and proved undeveloped reserves is used as the base for depleting oramortizing leasehold acquisition costs and costs to construct offshore platforms and associated asset retirement costs. also, the fund reviews the carrying value of its oil and gas properties for impairment whenever events and circumstances indicate that therecorded carrying value of its oil and gas properties may not be recoverable. recoverability is evaluated by comparing estimatedfuture net undiscounted cash flows to the carrying value of the oil and gas properties at the time of the review. if the carryingvalue exceeds the estimated future net undiscounted cash flows, the carrying value of the oil and gas properties is impaired, andwritten down to fair value. f-2 table of contents estimates of proved reserves are key componentsof the fund’s most significant estimates involving its rate for recording depletion and amortization and estimated futurecash flows of oil and gas properties used to test for impairment. annually, the fund engages an independent petroleum engineeringfirm to perform a comprehensive study of the fund’s proved properties to determine the quantities of reserves and the periodover which such reserves will be recoverable. the fund’s estimates of proved reserves are based on the quantities of oiland natural gas that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future yearsfrom known reservoirs under existing economic and operating conditions. the fund’s oil and gas propertiesnet balance was $9.5 million as of december 31, 2020 and depletion and amortization expense recognized was $2.4 million for theperiod ended december 31, 2020. no impairment was recognized during 2020. we identified the impact of the oil andnatural gas reserve quantities on the oil and gas properties and depletion and amortization financial statement line items andthe evaluation of impairment of long-lived assets as a critical audit matter due to the significant judgments made by the fund.the significant judgments made by the fund include the use of specialists to develop and evaluate the fund’s oil and naturalgas reserve quantities, future cash flows, reserve risk weightings, future development costs, and future oil and natural gas commodityprices. auditing these significant judgments required a high degree of auditor judgment and an increased extent of effort, includingthe need to involve our fair value specialists. how the critical audit matter was addressed in the audit our audit procedures related to the fund’sestimates and assumptions related to oil and natural gas reserve quantities included the following, among others: ·we evaluated the reasonableness of the fund’s oil and natural gas reserve quantities by performingthe following procedures: o comparing the fund’s oil and natural gas reserve quantities to historical production volumes.o evaluating the reasonableness of the methodology used and the production volume decline curve.o understanding the experience, qualifications and objectivity of management’s expert, an independentpetroleum engineering firm. ·we evaluated management’s assessed reserve risk weighting associated with the developmentof proved, probable and possible oil and natural gas reserve quantities by comparing the assessed risk to industry surveys. ·we evaluated the reasonableness of future development costs by comparing such costs to the approvalfor expenditures, historical well cost data and communication from third-party well operators. ·we evaluated, with the assistance of our fair value specialists, the reasonableness of future oiland natural gas commodity prices by performing the following procedures: o understanding the methodology utilized by management for development of the future oil and naturalgas commodity prices.o comparing the future oil and natural gas commodity prices to an independently determined rangeof prices.o comparing management’s future oil and natural gas commodity prices to published forward pricingindices and third-party industry sources. f-3 table of contents ·we evaluated the future oil and natural gas commodity prices by comparing future oil and naturalgas commodity price differentials to historical realized price differentials. /s/ deloitte & touche llp parsippany, new jersey march 2, 2021 we have served as the fund's auditor since2006.

critical audit matters” section of our report.basis for opinions the company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in management’s annual report on internal control over financial reporting appearing under item 9a. our responsibility is to express opinions on the company’s consolidated financial statements and on the company's internal control over financial reporting based on our audits. we are a public accounting firm registered with the public company accounting oversight board (united states) (pcaob) and are required to be independent with respect to the company in accordance with the u.s. federal securities laws and the applicable rules and regulations of the securities and exchange commission and the pcaob.we conducted our audits in accordance with the standards of the pcaob. those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. our audits also included performing such other procedures as we considered necessary in the circumstances. we believe that our audits provide a reasonable basis for our opinions.subsequent event as discussed in note 22 to the financial statements, in march 2020, the covid-19 outbreak was declared to be a global pandemic and the company temporarily closed its company-operated stores in north america and europe, effective beginning march 15, 2020 and march 16, 2020, respectively, and expects these stores to remain closed until further notice. the current circumstances are dynamic and the impacts of covid-19 on the company’s business operations cannot be reasonably estimated at this time, although the company anticipates covid-19 will have a material adverse impact on its business, results of operations, financial condition and cash flows in fiscal 2020. definition and limitations of internal control over financial reporting a company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. a company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets 83table of contentsof the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.impairment of long-lived assets - stores as described in notes 2, 6 and 8 to the consolidated financial statements, the company’s consolidated property and equipment, net balance was $665.3 million and consolidated operating lease right-of-use assets balance was $1,231.0 million as of february 1, 2020. during fiscal 2019, the company recognized store asset impairment charges of $22.4 million. the company’s long-lived assets, primarily operating lease right-of-use assets, leasehold improvements, furniture, fixtures and equipment, are grouped with other assets and liabilities at the store level, which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. on at least a quarterly basis, management reviews its asset groups for indicators of impairment, which include but are not limited to, material declines in operational performance, a history of losses, an expectation of future losses, adverse market conditions, store closure or relocation decisions, and any other events or changes in circumstances that would indicate the carrying amount of an asset group might not be recoverable. if an asset group displays an indicator of impairment, it is tested for recoverability by comparing the sum of the estimated future undiscounted cash flows attributable to the asset group to the carrying amount of the asset group. this recoverability test requires management to make assumptions and judgments related, but not limited, to management’s expectations for future cash flows from operating the store. the key assumptions used in developing these projected cash flows used in the recoverability test include estimates of future sales, gross profit and, to a lesser extent, operating expenses. if the sum of the estimated future undiscounted cash flows attributable to an asset group is less than its carrying amount, and it is determined that the carrying amount of the asset group is not recoverable, management determines if there is an impairment loss by comparing the carrying amount of the asset group to its fair value. fair value of an asset group is based on the highest and best use of the asset group, often using a discounted cash flow model that utilizes level 3 fair value inputs. the key assumptions used in estimating fair value of an asset group may include discounted estimates of future cash flows from operating the store or comparable market rents. an impairment loss is recognized based on the excess of the carrying amount of the asset group over its fair value.the principal considerations for our determination that performing procedures relating to the impairment of long-lived assets - stores is a critical audit matter are that there was significant judgment by management when testing long-lived asset groups for recoverability and determining the fair value of the asset groups to measure impairment. this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating management’s future cash flow projections, in particular, the assumptions related to estimates of future sales, gross profit and comparable market rents. in addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s long-lived assets - stores recoverability test and determination of the fair value of the asset groups. these procedures also included, among others (i) evaluating the relevance of the historical operating results data used in management’s impairment assessment; (ii) evaluating the appropriateness of the models used by management in developing the fair value measurements; (iii) testing the completeness, accuracy, and relevance of underlying data used in the models; and (iv) evaluating the reasonableness of the significant assumptions, including, as applicable, estimates of future sales, gross profit and comparable market rents. evaluating management’s assumptions related to estimates of future sales, gross profit and comparable market rents involved, as applicable, evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the asset groups; (ii) the consistency with external market data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. professionals with specialized skill and knowledge were used to assist in the evaluation of the reasonableness of the company’s comparable market rents assumption.84table of contents adoption of the leases accounting standard - impairment of right-of-use assets for stores as described above and in note 2 to the consolidated financial statements, the company adopted the new leases accounting standard effective february 3, 2019. upon adoption, the company recognized operating lease right-of-use assets of $1,234.5 million, corresponding operating lease liabilities of $1,474.1 million and a cumulative adjustment decreasing the opening balance of retained earnings of $75.2 million. the cumulative adjustment decreasing the opening balance of retained earnings primarily related to previously impaired stores, which therefore were assessed for impairment upon adoption. to the extent that the initial carrying amount for each such operating lease right-of-use asset was greater than its fair value, an impairment charge was recognized as an adjustment to the opening balance of retained earnings on the date of adoption. the key assumptions used in estimating the fair value of the operating lease right-of-use assets on the date of adoption included comparable market rents and discount rates. the principal considerations for our determination that performing procedures relating to the adoption of the leases accounting standard - impairment of right-of-use assets for stores is a critical audit matter are that there was significant judgment by management when determining the fair value measurement of the operating lease right-of-use assets for stores where it was previously determined that the carrying value of assets was not recoverable. this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating the fair value measurement of the right-of-use assets, in particular the assumptions surrounding comparable market rents and discount rates. in addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the operating lease right-of-use asset impairment charges recognized upon adoption of the new leases accounting standard, including controls over the development of assumptions used in the valuation of these operating lease right-of-use assets. these procedures also included, among others, for the operating lease right-of-use assets subject to impairment evaluation (i) evaluating the appropriateness of accounting policies established by management; (ii) testing the inputs to management’s calculation of the operating lease right-of-use asset; and (iii) evaluating the reasonableness of assumptions used by management, including the determination of comparable market rents and discount rates. evaluating the reasonableness of management’s assumptions relating to comparable market rents involved assessing the consistency of assumptions used with external market and industry data and whether these assumptions were consistent with evidence obtained in other areas of the audit. evaluating the reasonableness of management’s assumption relating to the discount rates used in the fair value assessments involved evaluating the reasonableness of the discount rates used as compared to data reflecting a market participants’ return requirements. professionals with specialized skill and knowledge were used to assist in the evaluation of the reasonableness of the company’s comparable market rents and discount rates assumptions. /s/ pricewaterhouse coopers llp columbus, ohio march 31, 2020 we have served as the company’s auditor since 1996.

critical audit matter the critical audit matter communicated below are matters arisingfrom the current period audit of the consolidated financialstatements that were communicated or required to be communicated tothe audit committee and that: (1) relateto accounts or disclosures that are material to the consolidatedfinancial statements and (2) involved especially challenging,subjective, or complex judgments. the communication of criticalaudit matters does not alter in any way our opinion on theconsolidated financial statements, taken as a whole, and we arenot, by communicating the critical audit matters below, providingseparate opinions on the critical audit matters or on the accountsor disclosures to which they relate. impairment of long-lived assets as described in note 8 to the consolidated financial statements,the company’s consolidated property, plant and equipmentbalance relating to refinery operations was $64 million as of december 31, 2020. management conducts an impairment test wheneverfacts or circumstances indicate that the carrying value of theassets may not be recoverable. the carrying value is notrecoverable if it exceeds the sum of the undiscounted cash flowsexpected to result from the use and eventual disposition of theasset or group of assets. if the carrying value exceeds the sum ofthe undiscounted cash flows, an impairment loss equal to the amountby which the carrying value exceeds the fair value of the asset orgroup of assets is recognized. management applies significantjudgment in projecting future cash flow that includes the use ofsignificant assumptions with respect to future sales of refinedproduct and commodity pricing. we identified the evaluation of the impairment analysis forlong-lived assets associated with the refinery operations as acritical audit matter due to the high degree of auditor judgmentand subjectivity in performing procedures to evaluatemanagement’s significant assumptions in projecting its futurecash flows. our audit procedures included, among others (i) testingmanagement’s process to project future cash flows, (ii)testing the completeness, accuracy and relevance of the data usedin projected future cash flows and (iii) evaluating thereasonableness of the significant assumptions used by management.evaluating the reasonableness of the significant assumptions usedby management involved a comparison of projected sales volumes tohistoric amounts and evaluating the reasonableness of fluctuationsbased on management’s future plans as well as factorssurrounding expected margins based on commoditypricing. we haveserved as the company’s auditor since 2002.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. critical audit matter description as described in note 2 to the financial statements, the company’s inventories are valued at the lower of cost or net realizable value, determined on an average cost basis. the company also determines a reserve for slow moving and obsolete inventory equal to the difference between the cost of the inventory and the estimated net realizable value of the inventory based on estimated reserve percentages, which consider historical usage, known trends, inventory age, and market conditions. at december 31, 2021, the approximate balance of inventory and inventory reserves were $1.6 million and $0.9 million, respectively. f-2we identified the reserve for slow moving and obsolete inventory as a critical audit matter, because of the significant judgment by management in estimating the slow moving and out of date inventory reserve, and the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the reasonableness of the significant assumptions used in developing the reserve. how the critical audit matter was addressed in the audit our audit procedures related to the following:·we evaluated the reasonableness of the significant assumptions used by management including those related to forecasted inventory usage by considering historic sales activity. ·we tested the completeness, accuracy, and relevance of the underlying data used in management's estimates of slow-moving inventory. ·we tested the calculations and application of management’s methodologies related to the valuation estimates of slow-moving inventory. ·we developed an independent expectation of the excess and out-of-date inventory reserve, which included using historic inventory activity and compared our independent expectation to the amount recorded in the financial statements. /s/ sadler, gibb & associates, llc we have served as the company’s auditor since 2010.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.88table of contents revenue recognition description of the matter as discussed in note 2, the company recognizes revenue from the sale of communications services offered through software solutions, which are generally derived from usage and monthly service fees from both the c paa s and other segments. usage revenue includes voice communication (primarily driven by inbound minutes, outbound minutes and toll-free minutes) and messaging communication (driven by the number of messages) that traverse the platform and network. revenue for these services is recognized in the period the usage occurs. monthly service fees include the provisioning and management of phone numbers and emergency services access, which are recognized based on the quantity of phone numbers in service and the quantity of phone numbers with emergency services access during the month, respectively.the processing and recording of revenue from voice and messaging data usage is highly automated and involves capturing and pricing significant volumes of data across multiple systems. similarly, the provisioning and management of phone numbers and emergency services access is also highly automated and involves capturing and pricing the quantity of phone numbers in service and the quantity of phone numbers with emergency services access during the month. given the complex automated systems utilized to capture, process, and ultimately record revenue, performing procedures to audit revenue required a high degree of auditor judgment and extensive audit effort.how we addressedthe matter in our audit we obtained an understanding, evaluated the design, and tested the operating effectiveness of controls that address the risks of material misstatement relating to the measurement and occurrence of revenue. this included involvement of audit professionals with significant experience in the use of information technology (it) to support business operations and related controls. with the involvement of our it professionals, we identified the significant systems used to capture and process voice usage, phone number services, emergency services access, and messaging services, and tested the it general controls over those systems, including testing of user access and change management controls. in addition, our audit procedures included testing of other manual reconciliation controls designed to determine the accuracy and completeness of data processed and transferred across multiple platforms in connection with the recognition of revenue for voice and messaging usage, the quantity of phone numbers in service, and the quantity of phone numbers with emergency services access during the period. to test the company’s revenue, our audit procedures included, among other procedures, performing data analytics by extracting data from the company’s systems to evaluate the completeness and accuracy of recorded revenues, testing a sample of revenue transactions, which included evaluating the transaction price based on inspection of customer contracts and approved rate tables, as well as testing the mathematical accuracy of the recorded revenue based on the voice and messaging usage, as well as the quantity of phone numbers in service and quantity of phone numbers with emergency services access during the period.89table of contents business combination description of the matter as explained in note 3 to the consolidated financial statements, on november 2, 2020 the company completed the acquisition of voice topco limited (“voxbone”) for total estimated purchase consideration of $519.4 million. the acquisition was accounted for as a business combination. the company recorded intangible assets from this acquisition, including customer relationships and developed technology of $148.5 million and $84.1 million, respectively. the company used the multi-period excess earning method to estimate the preliminary fair value of the customer relationships and the relief from royalty method to estimate the preliminary fair value of the developed technology, each of which are based on management’s estimates and assumptions.auditing the company's accounting for its acquisition of voxbone was complex and subjective due to the significant estimation uncertainty in determining the fair value of the above identified intangible assets, which was primarily due to the sensitivity of the respective fair values to the underlying assumptions. the fair value estimate of the customer relationships intangible asset included significant assumptions in the prospective financial information (including revenue growth) and the discount rate. the fair value estimate of the developed technology intangible asset included significant assumptions in the prospective financial information (including revenue growth and royalty rate) and the discount rate. these significant assumptions for each of the identified intangible assets are forward-looking and could be affected by future economic and market conditions.how we addressedthe matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the accounting for the acquisition. our tests included controls over the estimation process and models to estimate the fair values of the above identified intangible assets, as well as controls over management’s review of the valuation methodologies and significant assumptions discussed above.to test the estimated fair values of the customer relationship and developed technology intangible assets, we performed audit procedures that included, among others, evaluating the company's selection of the valuation methodologies, testing the significant assumptions, and testing the completeness and accuracy of the underlying data. for example, we compared the significant assumptions in the prospective financial information, including the forecasted revenue growth rates, to current industry trends, as well as to the historical performance of the acquired business. with the assistance of our valuation specialists, we evaluated the valuation methodologies, and significant assumptions, including royalty rate and discount rates. this included understanding and validating the source information underlying the determination of the royalty rate and discount rates and testing the mathematical accuracy of the calculations. in addition, we developed a range of independent estimates for the discount rates using publicly available market data for comparable entities and comparing those to the discount rates selected by management./s/ ernst & young llp we have served as the company’s auditor since 2012.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.indefinite-life intangible assets annual impairment assessments for certain brand names as described in notes 1 and 6 to the consolidated financial statements, the company’s consolidated indefinite-life intangible asset balance was $17.3 billion as of december 31, 2021, which consists principally of brand names. at least annually management assesses indefinite-life intangible assets for impairment and if significant potential impairment risk exists for a specific asset, management quantitatively tests the asset for impairment by comparing its estimated fair value with its carrying value. as disclosed by management, management estimates fair value using several accepted valuation methods, including relief of royalty, excess earnings and excess margin, that utilize estimates of future sales, earnings growth rates, royalty rates and discount rates to determine a brand name’s fair value. the principal considerations for our determination that performing procedures relating to the indefinite-life intangible asset annual impairment assessments for certain brand names is a critical audit matter are (i) the significant judgment by management when developing the fair value of the indefinite-life intangible assets; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to estimates of future sales, earnings growth rates, royalty rates, and discount rates for certain brand names; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.74table of contents addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the indefinite-life intangible asset impairment assessments, including controls over the annual valuation of certain brand names. these procedures also included, among others (i) testing management’s process for developing the fair value of the indefinite-life intangible assets; (ii) evaluating the appropriateness of the valuation methods; (iii) testing the completeness and accuracy of underlying data used in the methods; and (iv) evaluating the reasonableness of the significant assumptions used by management related to the estimates of future sales, earnings growth rates, royalty rates, and discount rates. evaluating management’s significant assumptions related to estimates of future sales and earnings growth rates involved evaluating whether the significant assumptions used by management were reasonable considering (i) the current and past performance of the certain brand names; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the company’s valuation methods and (ii) the reasonableness of the royalty rate and discount rate significant assumptions./s/ pricewaterhouse coopers llp chicago, illinois february 4, 2022 we have served as the company’s auditor since 2001.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.goodwill and indefinite-lived franchise rights acquired impairment assessments - united states and canada as described in notes 2 and 7 to the consolidated financial statements, goodwill associated with the united states and canada reporting units was $103 million and $42 million, respectively, as of january 2, 2021, and the indefinite-lived franchise rights acquired for the united states and canada was $681 million and $57 million, respectively, as of january 2, 2021. management reviews goodwill and indefinite-lived franchise rights acquired for potential impairment on at least an annual basis or more often if events so require. potential goodwill impairment is identified by comparing the estimated fair value of a reporting unit to its carrying value, and potential impairment of indefinite-lived franchise rights acquired is identified by comparing the estimated fair value for these rights to their carrying value. fair value of goodwill is estimated by management using a discounted cash flow approach. fair value of indefinite-lived franchise rights acquired is estimated by management using a discounted cash flow approach referred to as the hypothetical start-up approach for franchise rights related to the company’s workshops + digital business and a relief from royalty methodology for franchise rights related to the company’s digital business. management uses various assumptions to determine fair value, including revenue growth rates, operating income margin, market-based royalty rate, and discount rates.the principal considerations for our determination that performing procedures relating to the goodwill and indefinite-lived franchise rights acquired impairment assessments for the united states and canada is a critical audit matter are the significant judgment by management when developing the fair value measurements; this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates and operating income margins.f-3addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s goodwill and indefinite-lived franchise rights acquired impairment assessments, including controls over the valuation of the company’s reporting units and indefinite-lived franchise rights acquired. these procedures also included, among others, (i) testing management’s process for developing the fair value estimates of the united states and canada reporting units and indefinite-lived franchise rights acquired for the united states and canada, (ii) evaluating the appropriateness of the discounted cash flow approach and the relief from royalty methodology, (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow approach and relief from royalty methodology, and (iv) evaluating the significant assumptions used by management related to revenue growth rates and operating income margins. evaluating management’s assumptions related to revenue growth rates and operating income margins involved evaluating whether the assumptions used by management were reasonable considering the current and past performance of the reporting units and indefinite-lived franchise rights acquired and whether these assumptions were consistent with evidence obtained in other areas of the audit. professionals with specialized skill and knowledge were used to assist in the evaluation of the company’s discounted cash flow approach and relief from royalty methodology./s/ pricewaterhouse coopers llp new york, new york february 25, 2021 we have served as the company’s auditor since 1999.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.f-1annaly capital management, inc. and subsidiaries financial statements valuation of mortgage servicing rights description ofthe matter fair value of mortgage servicing rights (“ms rs”) totaled $378 million at december 31, 2019. as disclosed in note 11 to the consolidated financial statements, the company classifies its investments in ms rs as level 3 in the fair value measurements hierarchy. these fair value estimates for ms rs primarily utilize discounted cash flow models that incorporate unobservable market data inputs including prepayment rates, delinquency rates, costs to service and discount rates. auditing the valuation of ms rs is complex and required the use of a specialist due to the high degree of judgment in management’s assumptions used in the measurement process which are unobservable in nature including prepayment rates, delinquency rates, costs to service and discount rates. these assumptions have a significant effect on the valuation of the ms rs. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s processes to estimate the fair value of its ms rs, including management’s review of the completeness and accuracy of key inputs used in the discounted cash flow model, management’s independent review of assumptions through evaluating historical results and available market information, and management’s comparison of internally developed fair values to fair values obtained from third-party pricing providers. to test the valuation of the ms rs, our audit procedures included, among others, evaluating the company’s use of the discounted cash flow valuation technique, utilizing the support of a valuation specialist to independently assess whether the company’s assumptions (e.g., prepayment rates, delinquency rates, costs to service and discount rates) were supportable based on market data, and independently developing a range of fair values for the ms rs. we compared management’s assumptions and fair value estimates to the assumptions and fair value ranges developed by the valuation specialist to assess management’s estimate of fair value. amortization of net premiums on residential securities description of the matter amortization of net premiums on residential securities totaled $1.114 billion for the year ended december 31, 2019. as disclosed in note 3 to the consolidated financial statements, the company amortizes or accretes premiums or discounts into interest income for its residential mortgage-backed securities. amortization or accretion is derived taking into account estimates of future principal prepayments, which are derived using third-party model and market information, in the calculation of the effective yield. auditing the amortization of net premiums on agency mortgage-backed securities is complex due to the high degree of judgment in management’s assumptions used in the measurement process including prepayment rates which are uncertain in nature. these assumptions have a significant effect on the amortization of net premiums on securities. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s processes to calculate amortization of net premiums on its agency and agency interest-only mortgage-backed securities, including management’s review of the completeness and accuracy of data (e.g. prepayment rates) used in the cash flow models and the calculation of projected cash flows. to test the amortization of net premiums our audit procedures included, among others, evaluating the company's methodology and utilizing the support of a valuation specialist to independently develop ranges of prepayment rates for a sample of securities based on current industry, market and economic data. we compared management’s prepayment rates to the ranges developed by the valuation specialist to assess management’s estimate. we also recalculated management’s projected cash flows and the amortization of premiums or accretion of discounts for a sample of securities. /s/ ernst & young llp we have served as the company’s auditor since 2012.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.fair value of the fiber infrastructure reporting unit as discussed in notes 3 and 12 to the consolidated financial statements, the company’s consolidated goodwill balance was $601.9 million as of december 31, 2020, all of which is associated with the fiber infrastructure segment. the company performs goodwill impairment testing on an annual basis and whenever events or changes in circumstances occur that would more likely than not reduce the fair value of the reporting unit below its carrying amount. the company estimated the fair value of the fiber infrastructure reporting unit using a combination of an income approach based on the present value of estimated future cash flows and a market approach based on acquisition multiples paid for fiber companies in recent market transactions. the company recorded impairment of goodwill for the fiber infrastructure reporting unit of $71.0 million during the year ended december 31, 2020 to reduce the carrying amount of the reporting unit to estimated fair value.we identified the evaluation of the fair value of the fiber infrastructure reporting unit as a critical audit matter. we performed a sensitivity analysis to determine the significant assumptions used to estimate the fair value of the reporting unit, which required challenging auditor judgment. specifically, forecasted revenue, profit margin, and capital expenditures were challenging to test as they represent subjective estimates of future operations in uncertain market and economic conditions. the discount rate and acquisition multiple were also challenging to test as they represent subjective judgments about the investment market for infrastructure operations and assets. minor changes to these assumptions, either individually or in aggregate, could have a significant effect on the company’s assessment of the fair value of the reporting unit and the amount of goodwill impairment. additionally, the audit effort associated with the evaluation of the fair value of the reporting unit required specialized skills and knowledge.the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls related to the company’s reporting unit fair value determination. this included controls related to forecasted revenue, profit margin, capital expenditures, discount rate, and acquisition multiple. we evaluated the forecasted revenue and profit margins by comparing them to peer company analyst reports. we also obtained an understanding of the company’s intent to carry out particular courses of action by inspecting their written plans and other relevant documentation, and assessed how the company incorporated those planned actions into forecasted revenue, profit margins and capital expenditures. we compared the company’s historical revenue, profit margin and capital expenditure forecasts to actual results to assess the company’s ability to accurately forecast. we also compared historical actual revenue, profit margin, and capital expenditures to the forecasted revenue, profit margin, and capital expenditures. we also evaluated whether the information used in the determination of the fair value of the reporting unit was consistent with other information used internally, presented to the board of directors, and used to develop other externally presented financial information. in addition, we involved a valuation professional with specialized skills and knowledge, who assisted in: •evaluating the company’s discount rate by comparing it to a discount rate range that was developed using publicly available market data for comparable entities •assessing the comparable transactions used by management to develop the acquisition multiple, and the selection of the acquisition multiple used to determine the fair value of the fiber infrastructure reporting unit. 63table of contents windstream settlement agreement as discussed in notes 3, 5, 6 and 17 to the consolidated financial statements, the company settled its litigation with windstream holdings and windstream services, llc (windstream) and certain of their creditors effective september 21, 2020 pursuant to an agreement (the settlement agreement), which included modifying and bifurcating the master lease agreement with windstream into two separate leases (new leases). the settlement agreement also included an asset purchase agreement, in which the company acquired property, plant and equipment, intangible assets related to contracts and underlying rights agreements, an intangible liability related to a below market lease, and other assets. management allocated the total consideration in the arrangement to the components of the lease modification, litigation settlement, and asset purchase based on their estimated fair values. the company determined that a separately identifiable benefit existed for the litigation settlement as it can be valued independently from the other components of the arrangement. the company recognized a $650.0 million settlement expense in the consolidated statement of income for the year ended december 31, 2020 and recognized property plant and equipment of $170.8 million, intangible assets related to contracts of $59.3 million, and a liability related to a below-market lease of $195.1 million. management determined that the terms of the new leases were at market terms. this background paragraph relates to the following three critical audit matters.separately identifiable benefit of settlement of litigation we identified the evaluation of whether the settlement of litigation pursuant to the settlement agreement is a separately identifiable benefit, which is distinct from the assets acquired and future lease payments to be made under the new leases, as a critical audit matter. challenging auditor judgment, including specialized skills and knowledge, was required to evaluate the appropriateness of the methodology and significant assumptions used in determining that the settlement of litigation is a separately identifiable benefit and should be allocated a portion of the settlement agreement consideration. specifically, management valued the litigation settlement using an expected value model with unobservable assumptions regarding potential litigation outcomes. the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls over the company’s process to develop and review the expected value model, including those related to the development of the key assumptions for the potential litigation outcomes. we evaluated the potential litigation outcomes through discussion with management and management’s specialists, and inspection of supporting documents. in addition, we involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the reasonableness of valuation methodology used by management.valuation of assets and liability acquired in the asset purchase agreement we identified the evaluation of the fair value of property, plant and equipment, intangible assets related to contracts, and the liability related to a below-market lease assumed in the asset purchase agreement as a critical audit matter. subjective auditor judgment was required to evaluate the significant assumptions regarding (1) the replacement cost assumptions used to value the property, plant and equipment, and (2) the discount rate assumptions used to value the contracts intangible asset and below-market lease liability, due to limited observable market information. in addition, the fair value of these assets and the liability were sensitive to possible changes to the significant assumptions noted above.the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls over the company’s acquisition-date valuation process, including those related to the development of the significant assumptions noted above. we evaluated the company’s replacement cost estimate by comparing it to relevant supporting documentation including, where applicable, engineering records to validate relevant attributes of the assets. we also compared attributes used in the valuation models to the underlying contracts. in addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:64table of contents •comparing the cost estimates used in the valuation to available market data for comparable assets •evaluating the company’s discount rates by comparing them to a discount rate range that was developed using publicly available market data for comparable entities.fair value of leased assets we identified the evaluation of the fair value of assets leased to windstream, including whether the new leases were on market terms, as a critical audit matter. challenging auditor judgment, including specialized skills and knowledge, was required to evaluate whether the fair value of the assets leased to windstream used in determining the lease classification test for the new leases were reasonable and whether the new leases reflected fair market rental rates and terms. specifically, the replacement cost assumption used to value the assets underlying the new leases and for determining whether the terms were at market was challenging to test given its subjectivity and sensitivity to variation.the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls over the company’s leased assets valuation process, including those related to the development of the replacement cost. we evaluated the company’s replacement cost by comparing to relevant support including, where applicable, engineering records to validate relevant attributes of the assets and to evaluate whether the leases were at market terms. in addition, we involved valuation professionals with specialized skills and knowledge, who assisted in: •comparing the cost estimates used in the valuation to available market data for comparable assets •evaluating the implied lease rates of the new leases by comparing them to a discount rate range that was developed using publicly available market data for comparable entities. we have served as the company’s auditor since 2020.

critical audit matters thecritical audit matter communicated below is a matter arising from the current period audit of the financial statements that werecommunicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are materialto the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication ofcritical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, bycommunicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.revenue recognition and associated contingency fees asdescribed in note b to the consolidated financial statements, the company relies on royalty reports received from third partylicensees to record its revenue for its royalty bearing licenses. revenue earned on the company’s fully-paid licenses, forwhich the company has no future obligations or performance requirements is generally recognized when the company has obtainedthe signed license agreement, all performance obligations have been substantially performed, amounts are fixed and determinable,and collectability is reasonably assured. the timing and amount of revenue recognized depends upon a number of factors includingthe specific terms of each agreement and the nature of the deliverables and obligations. f-1 asdescribed in note b to the consolidated financial statements, the company includes in cost of revenue and related costs contingentlegal fees payable to patent litigation counsel related to net proceeds from settlements.weidentified revenue recognition and the associated contingency fees as a critical audit matter because the license agreements andcontingency agreements involve interpretation and estimates by management in determining the consideration for each specific licenseagreement and the amount of the associated contingency fees.ouraudit procedures related to the company’s royalty bearing and fully paid licenses, and associated contingency fees includedthe following:-we evaluated management’s significant accounting policies and estimates related to royalty bearing and fully-paid license revenue. -we obtained and examined the final settlement and license agreements entered into during the year and tested management’s identification of the significant terms for completeness. we evaluated the appropriateness of management’s application of their accounting principles, in their determination of revenue recognition.-we reviewed the contingency fee agreements with the company’s legal counsel and evaluated management’s estimates and calculations of contingency fees. -we confirmed with third party legal counsel all outstanding legal costs and contingency fees outstanding as of december 31, 2020. wehave served as the company’s auditor since 2014.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.testing of revenue recognition as discussed in note 2(e) to the consolidated financial statements, and disclosed in the consolidated statement of operations, the company has recorded $1,134.5 million in revenues for the year ended december 31, 2019. the company’s revenue is derived from usage and non-usage based fees earned from customers accessing the company’s enterprise cloud computing services. the company’s revenue recognition process is highly automated and revenue is recorded within the company’s general ledger through reliance on customized and proprietary information technology (it) systems.we identified the testing of revenue recognition as a critical audit matter. this matter required especially subjective auditor judgment because of the number of information technology (it) applications involved in the revenue recognition process. auditor judgment was required in determining the nature and extent of audit evidence obtained over revenue. involvement of it professionals with specialized skills and knowledge was required to assist with the performance of certain procedures and determination of it applications subject to testing.the primary procedures we performed to address this critical audit matter included the following. we involved it professionals with specialized skills and knowledge, who assisted in testing the various systems interacting with the company’s revenue recognition process. we tested certain internal controls over the company’s general information technology and application controls related to the systems utilized within the company’s revenue recognition process, focusing on the automated elements of the flow of transactions. we evaluated the company’s significant accounting policies related to revenue recognition. for a sample of customer agreements we tested the company’s identification and treatment of significant contract terms, including comparing the pricing reflected in the company’s revenue it system to the contractually agreed upon pricing with the customer. for a sample of transactions we compared the amounts recognized for consistency with underlying documentation, including contracts with customers. we assessed the recorded revenue by comparing revenue to underlying cash receipts. we inspected credits issued subsequent to year end to assess the revenue recorded within the period.in addition, we evaluated the overall sufficiency of audit evidence obtained over revenue.assessment of the acquisition date valuation of intangible assets related to a business combination as discussed in note 6 to the consolidated financial statements, on february 1, 2019, the company acquired the outstanding shares of send grid, inc. by issuing shares of its class a common stock worth approximately $2.7 billion. as part 70table of contentsof the acquisition, the company acquired $483.0 million of intangible assets, including developed technology and customer relationships.we identified the assessment of the acquisition date valuation of the developed technology and customer relationship intangible assets acquired as a critical audit matter. there was a high degree of subjectivity in evaluating the discount rate and forecasted revenue growth rates used to derive the fair value of the developed technology and customer relationship acquired intangible assets.the primary procedures we performed to address the critical audit matter included the following. we tested certain internal controls over the company’s valuation process, including the company’s controls over the revenue growth rate forecasts and the assumptions used to develop the discount rate. we compared prior period forecasted revenue to prior period actual revenue to evaluate the company’s ability to forecast. we evaluated the company’s forecasted revenue growth rates used to value intangible assets by 1) comparing the growth forecast assumptions to peer companies; and 2) comparing forecasted growth rates to historical growth rates. we involved a valuation professional with specialized skills and knowledge, who assisted in testing by:•evaluating the discount rate used by the company to value the developed technology and customer relationship intangible assets by comparing it against a discount rate range that was independently developed using publicly available data for comparable companies; and•developing an estimate of the fair value of the developed technology and customer relationship intangible assets acquired using the company’s cash flow forecast and independently developed discount rate, and comparing the results of our estimate of fair value to the company’s fair value estimate./s/ kpmg llp we have served as the company’s auditor since 2013.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. valuation of deferred consideration description of the matter at december 31, 2019, the company recorded a current deferred consideration liability of $13,953,000, a long term deferred consideration liability of $159,071,000 and a loss on the revaluation f-2 table of contents of deferred consideration of $11,293,000. as more fully described in notes 2, 5 and 12 to the consolidated financial statements, deferred consideration represents an obligation of the company for fixed payments of physical gold bullion to a third party into perpetuity that is carried at fair value. the company values deferred consideration using a discounted cash flow model and the significant unobservable inputs used are the discount rate, the perpetual growth rate and the extrapolated forward-looking gold prices. auditing the company’s valuation of deferred consideration was complex due to the significant estimation required in determining the fair value of the current and long-term liability. in particular, the fair value estimate was sensitive to the significant unobservable inputs described above which are affected by future economic and market conditions and thus require significant judgment. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s deferred consideration fair value process. this included controls over management’s review of the significant unobservable inputs described above and the completeness and accuracy of the inputs to the valuation model. to test the estimated fair value of the deferred consideration liability, our audit procedures included, among others, reading the terms of the gold royalty agreement to make gold payments, evaluating the company’s selection of its fair value methodology, testing the significant unobservable inputs used in the model, evaluating the clerical accuracy of the valuation model and testing the completeness and accuracy of the underlying data used by the company to determine fair value. for example, we agreed underlying data used in management’s valuation model to source documents and/or publicly available data, such as the gold royalty agreement and third-party gold price projections. in addition, we involved our valuation specialists to assist in our evaluation of the company’s valuation model and the discount rate used by the company, to calculate an independent estimate of the fair value of the company’s deferred consideration liability which we compared to the company’s fair value estimate and to assist in performing a sensitivity analysis of the significant unobservable inputs to evaluate the change in the fair value estimate that would result from changes in these inputs. etfs indefinite-lived intangible assets—assessment of carrying value description of the matter at december 31, 2019, the company held indefinite-lived intangible assets related to rights to advisory agreements in connection with the etfs acquisition, with an aggregate carrying value of $601,247,000. as described in notes 2 and 25 to the consolidated financial statements, these assets were assessed for impairment based upon a quantitative test. indefinite-lived intangible assets are impaired if their estimated fair values are less than their carrying values. the f-3 table of contents company determined the fair value of its etfs intangible assets using an income approach (discounted cash flow analysis) with significant unobservable inputs that included the weighted average cost of capital and projected revenue growth rates. auditing the company’s quantitative impairment assessment for its etfs indefinite-lived intangible assets was complex due to the significant unobservable inputs required in determining fair value. in particular, the fair value estimate of the etfs indefinite-lived intangible assets was sensitive to the significant unobservable inputs described above which are affected by future economic and market conditions and thus require significant judgment. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s indefinite-lived intangible asset impairment assessment process. this included controls around management’s review of the significant unobservable inputs described above and the completeness and accuracy of the inputs to the valuation model. to test the company’s quantitative impairment assessment of etfs indefinite-lived intangible assets, our audit procedures included, among others, evaluating the company’s selection of its fair value methodology, testing the significant unobservable inputs used in the valuation model, evaluating the clerical accuracy of the valuation model and testing the completeness and accuracy of the underlying data used by the company to determine fair value. for example, we agreed to our audit workpapers the etfs cash flows which were used as a data point in the discounted cash flow analysis. we compared the projected revenue growth rates to the company’s historical results and those of other guideline public companies in the same industry. in addition, we assessed the accuracy of the company’s historical projections by comparing them to actual operating results. we involved our valuation specialists to assist in our evaluation of the company’s valuation model, the weighted average cost of capital used by the company and the comparability of the guideline public companies selected by the company and to calculate an independent estimate of the indefinite-lived intangible assets which we compared to the company’s fair value estimate. /s/ ernst & young llp we have served as the company’s auditor since 2010.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. medical unit goodwill description of the matter at june 30, 2019, goodwill related to the company’s medical segment, including the medical unit was $5.7 billion. as discussed in note 4 to the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level. auditing management’s annual goodwill impairment test for the medical unit was challenging because this reporting unit’s fair value had an impairment in the previous year and there is significant judgement required in determining the fair value of the reporting unit. in particular, the fair value estimate was sensitive to significant judgmental assumptions including the revenue growth rate, gross margin, distribution, selling, general and administrative expenses, and company specific risk premium, which are affected by expectations about future market or economic conditions. cardinal health | fiscal 2019 form 10-k42reports how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s goodwill impairment review process. for example, we tested controls over management’s review of significant judgmental assumptions, including the revenue growth rate, gross margin, distribution, selling, general and administrative expenses, and company specific risk premium, among other assumptions. to test the estimated fair value of the company’s reporting unit, we performed audit procedures that included, among others, evaluating methodologies used, involving our valuation specialists in testing the significant assumptions described above and testing the underlying data used by the company in its analysis for completeness and accuracy. we compared the significant assumptions used by management to current industry and economic trends, recent historical performance, changes to the reporting unit’s business model, customer base or product mix and other relevant factors. we assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting unit that would result from changes in the assumptions. we evaluated the incorporation of the applicable assumptions into the model and tested the model’s computational accuracy. in addition, we inspected the company’s reconciliation of the fair value of all reporting units to the market capitalization of the company and assessed the results. product liability lawsuits description of the matter as described in note 8 to the consolidated financial statements, the company is a defendant in various product liability claims in which individuals seek damages associated with the use of cordis opt ease and trap ease inferior vena cava (ivc) filter products. the company accrues for losses and defense costs related to product liability at the time a loss is probable and the amount of loss can be reasonably estimated. the methodology used by the company to project future cordis ivc claim costs is based largely on recent experience, including claim filing rates, indemnity severity by claim type, sales data and defense costs. the company periodically reviews such estimates and records adjustments for changes in reserves in the period in which the change in estimate occurs. at june 30, 2019, the company’s product liability reserve balance related to the cordis ivc lawsuits totaled $368 million, net. the company believes there is a range of estimated losses with respect to these matters. because no amount within the range is a better estimate than any other amount within the range, the company has accrued the minimum amount in the range. the company estimates the high end of the range to be approximately $762 million, net of estimated insurance recoveries. auditing management’s accounting for and disclosure of loss contingencies related to the cordis ivc product liability lawsuits was challenging due to the significant judgment required to develop the key assumptions utilized in the model and the nature of information available given the early stages of these lawsuits and the limited claims history.how we addressed the matter in our audit we obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over management’s evaluation of the product liability litigation reserve. for example, we tested controls over management’s review of the model used to estimate the product liability reserve amount and the significant assumptions as described above used within the model. we also tested management’s controls over the completeness and accuracy of the data used in the model.to test management’s assessment of the probability of occurrence of a loss and whether the loss was reasonably estimable, we evaluated, for example, claims data of the company, we evaluated the legal letters obtained from internal and external legal counsel, and we discussed with internal and external legal counsel of the plaintiffs’ claims. among other procedures we performed to test the measurement of the product liability litigation reserve, we evaluated the method of measuring the reserve for claims including analyses to determine the range of possible losses, obtained and performed audit procedures relative to the analysis, tested the accuracy and completeness of the data, and evaluated new or contrary information affecting the estimate. in addition, we involved internal actuarial specialists to assist with our procedures related to the measurement of the product liability reserve. we have also assessed the adequacy of the company’s disclosures included in note 8 in relation to these matters. uncertain tax positions description of the matter as described in note 7 to the consolidated financial statements, the company’s unrecognized tax benefits related to its uncertain tax positions were approximately $456 million at june 30, 2019. the company operates in a multinational tax environment and is subject to tax treaty arrangements and transfer pricing guidelines for intercompany transactions that have pricing subjectivity. for those tax positions that qualify for recognition, the company uses significant judgment to measure the largest amount of benefit that is more likely than not to be realized upon ultimate settlement. for tax benefits that do not qualify for recognition, the company recognizes a liability for unrecognized tax benefits. auditing the measurement of tax positions related to transfer pricing used in intercompany transactions was challenging because the pricing of the intercompany transactions is based on pricing analyses that may produce a number of different outcomes or ranges of outcomes (e.g., the price that would be charged in an arm’s-length transaction). 43cardinal health | fiscal 2019 form 10-k reports how we addressed the matter in our audit we obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the company’s process to measure tax positions related to transfer pricing from intercompany transactions. for example, we tested management’s review of inputs and calculations of these tax positions, which included evaluation of the ranges of outcomes and pricing conclusions reached within management’s transfer pricing studies. to test the company’s measurement of tax positions related to transfer pricing used in intercompany transactions, we involved our tax professionals to assess the appropriateness of the ranges of outcomes utilized and the pricing conclusions reached within the transfer pricing studies conducted by the company. for example, we compared the transfer pricing methodology utilized by management to alternative methodologies and industry benchmarks. we also verified our understanding of the relevant facts by reading the company’s correspondence with the relevant tax authorities and any third-party advice obtained by the company. in addition, we used our knowledge of international and local income tax laws, as well as historical settlement activity from income tax authorities, to evaluate the appropriateness of the company’s measurement of uncertain tax positions related to transfer pricing used in these intercompany transactions. /s/ ernst & young llp we have served as the company's auditor since 2002.

critical audit matters the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.intangible assets, net – trade name — refer to notes 1 and 14 to the financial statements critical audit matter description the company has one indefinitely lived intangible asset consisting of the woodward l’orange trade name (“trade name”). as of september 30, 2021, the carrying value of the trade name is $67.2 million. the trade name is tested for impairment on an annual basis and more often if an event occurs or circumstances change that indicate the fair value of the trade name may be below its carrying amount. the company completed its annual impairment test of the trade name as of july 31, 2021. the results of impairment test indicated the estimated fair value of the trade name was in excess of its carrying value and, accordingly, no impairment existed. the fair value of the trade name was determined using discounted cash flows based on the relief from royalty method under the income approach. this method incorporates various estimates and assumptions, the most significant being projected revenue growth rates, royalty rates and the present value of the forecasted cash flows based on the discount rate and terminal growth rate. the company projects revenue growth rates and cash flows based on woodward l’orange’s current operational results, expected performance and operational strategies over a five-year period. these projections are adjusted to reflect current economic conditions and demand for certain products and require considerable management judgment. changes in these estimates and assumptions can have a significant impact on the fair value.we identified the fair value of the trade name as a critical audit matter because of the significant judgments and assumptions management makes related to the projection of revenue growth rates and the selection of the discount rate, terminal growth rate and royalty rate. this required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s projection of revenue growth rates and selection of the discount rate, terminal growth rate and royalty rate.42 how the critical audit matter was addressed in the audit our audit procedures related to the projection of revenue growth rates and selection of the discount rate, terminal growth rate, and royalty rate used in determining the fair value of the trade name included the following, among others: •we tested the effectiveness of controls over the fair value of the trade name, including those over the projection of revenue growth rates and the selection of the discount rate, terminal growth rate and royalty rate. •with the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate, terminal growth rate, and royalty rate by: −testing the source information underlying the determination of the discount rate, terminal growth rate and royalty rate and recalculating the mathematical accuracy of management’s calculation of the discount rate −developing a range of independent estimates over the discount rate and terminal growth rate and comparing those to the discount and terminal growth rates selected by management −comparing the royalty rate from comparable licensing agreements to the rate selected by management −searching for any events which could adversely impact the fair value of the brand •we evaluated the reasonableness of management’s projected revenue growth rates by: −comparing management’s projections to: −historical revenue results for woodward l’orange −internal communications to management and the board of directors −analyst and industry reports −peer company forecasts −considering the impact of changes in management’s projections from the july 31, 2021, annual assessment date to september 30, 2021 by comparing actual results for the period to management projections within the original valuation model. /s/ deloitte & touche llp denver, colorado november 19, 2021we have served as the company's auditor since 2008.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.evaluation of lease renewal options in lease classification assessment - refer to note 2 to the financial statements critical audit matter description upon lease inception, the company assesses lease classification under accounting standard codification topic 842 - leases to determine whether its leases should be classified as a direct financing, sales-type, or operating lease. this assessment requires management to evaluate the classification of each lease component based on specified criteria, including, among other matters, determining the noncancelable lease term and comparing the present value of the future minimum lease payments to the fair value of the leased components. in performing its lease classification assessment, management was required to make significant judgments in determining whether its tenants are economically compelled to exercise their renewal options in determining the appropriate noncancelable lease term at the commencement date of each lease. the company has concluded that it is reasonably certain that its tenants will exercise such renewal options.f - 2table of contents how the critical audit matter was addressed in the audit our audit procedures, related to management’s determination of the appropriate noncancelable lease term at the commencement date of its leases, included the following, among others: •we tested the design and operating effectiveness of controls over management’s review of lease classification of the lease components which included an evaluation of the lease renewal options in determination of the overall noncancelable lease term.•we read the executed lease agreements to understand material lease provisions, including renewal options, and evaluated their implications in the determination of the overall noncancelable lease term. •we evaluated the significant judgments management made in concluding that it is reasonable that its tenants’ will exercise all of their lease renewal options./s/ deloitte & touche llp new york, new york february 20, 2020 we have served as the company's auditor since 2016.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.subscription revenue – refer to notes 2 and 3 to the financial statements critical audit matter description the company derives its revenues predominantly from subscription services. subscription revenue primarily consists of fees from customers for access to the company’s cloud-based platform and involves a significant volume of transactions. the company recognizes subscription revenue on a ratable basis over the subscription contract term, beginning on the date the access to their platform is provided, assuming all other revenue recognition criteria have been met. for the year ended january 31, 2021, subscription revenue was $352.8 million.we identified subscription revenue as a critical audit matter due to the significant volume of transactions. performing procedures to audit subscription revenue required an increased extent of effort and auditor judgment, including the need to involve professionals with expertise in data analytics.how the critical audit matter was addressed in the audit our audit procedures related to the company’s subscription revenue included the following, among others: •with the assistance of our data analytics specialists, we performed a recalculation of subscription revenue recorded through the company’s relevant systems utilizing key attributes of subscription revenue transaction data, including the transaction price and revenue recognition timing, among others. we compared our recalculation of expected subscription revenue to the company’s recorded subscription revenue.•for a sample of subscription revenue transactions, we evaluated the accuracy of the data used in our recalculation of subscription revenue by comparing key attributes utilized in our recalculation to source documents.•we tested the completeness of the subscription revenue transaction data by selecting transactions from independent sources and evaluated whether those transactions were included in the subscription revenue transaction data. •we performed an analysis of journal entries to evaluate the relationship between recorded subscription revenue entries in the general ledger to other audited account balances such as deferred revenues, accounts receivable, and cash.business combinations – brandfolder – refer to note 8 to the financial statements critical audit matter description74table of contents the company completed the acquisition of brandfolder, inc. for $152.5 million on september 14, 2020. the company accounted for the transaction as a business combination using the acquisition method of accounting. accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including intangible assets of $45.3 million that were primarily comprised of acquired software technology of $17.4 million and customer relationships of $23.9 million. management estimated the fair value of the finite-lived software technology using the relief-from-royalty method under the income approach. the fair value determination of the software technology intangible assets required management to apply judgment which involved the use of significant assumptions with respect to the future revenue forecast, technology life, royalty rate, and the discount rate. management estimated the fair value of the finite-lived customer relationships using the multi-period excess earnings method and an incremental cash flow approach. the fair value determination of the customer relationships intangible assets required management to apply judgment which involved the use of significant assumptions with respect to the future cash flows forecast, base year annual recurring revenue, customer churn rate, and the discount rate. given the fair value determination of the software technology and customer relationships intangible assets for brandfolder, inc. required management to make significant estimates and assumptions related to the future revenue and cash flows forecast, technology life, royalty rate, base year annual recurring revenue, customer churn rate, and the discount rates, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.how the critical audit matter was addressed in the audit our audit procedures related to the future revenue and cash flows forecast, technology life, royalty rate, base year annual recurring revenue, customer churn rate, and the discount rates for the software technology and customer relationship intangible assets included the following, among others: •we assessed the reasonableness of management’s estimates and assumptions included in the future revenue and cash flows forecast, base year annual recurring revenue, customer churn rate, and technology life by comparing the projections and other assumptions to historical results and certain peer companies. •with the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodologies and (2) valuation assumptions such as discount rates, royalty rate, and long-term growth rate used in the future revenue and cash flows forecast, among others, by:◦testing the source information underlying the determination of the valuation assumptions and testing the mathematical accuracy of the calculations.◦developing a range of independent estimates and comparing those to the valuation assumptions selected by management.◦we compared the estimated weighted average return on assets, internal rate of return, and the discount rates used in the valuation models and evaluated whether they were consistent with each other./s/ deloitte & touche llp portland, oregon march 25, 2021 we have served as the company's auditor since fiscal 2021.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. f-2table of contents investment in affiliates - telesat — refer to notes 2, 3, and 5 to the financial statements.critical audit matter description the company participates in satellite services operations primarily through its ownership interest in telesat canada (“telesat”), a leading global satellite operator. telesat provides its satellite and communication services from a fleet of satellites that occupy canadian and other orbital locations. the company holds a 62.6% economic interest and a 32.6% voting interest in telesat. the company uses the equity method of accounting for its ownership interest in telesat. equity in net income (loss) of telesat is recorded based on the company’s economic interest in telesat, and also reflects amortization of profits eliminated, to the extent of its economic interest in telesat. the company prepares its financial statements in accordance with u.s. gaap, while telesat prepares its financial statements in accordance with international financial reporting standards as issued by the international accounting standards board (“ifrs”). as a result, telesat’s financial information is converted from ifrs to u.s. gaap in order for the company to record its share of equity in net income (loss) of telesat.given the complexity involved in converting telesat’s financial information from ifrs to u.s. gaap, coupled with past out of period adjustments associated with the company’s investment in telesat, auditing the conversion is complex and involves extensive effort, including the need to involve professionals knowledgeable about ifrs to u.s. gaap differences. how the critical audit matter was addressed in the audit our audit procedures over the conversion of telesat’s financial information included the following, among others:●we tested the effectiveness of the control over the company’s investment in telesat, including management’s review of the conversion of telesat’s financial information from ifrs to u.s. gaap. ●with the assistance of professionals knowledgeable about ifrs to u.s. gaap differences, we:o tested the completeness and accuracy of the conversion of telesat’s financial information from ifrs to u.s. gaap. o evaluated the propriety of a selection of conversion adjustments from ifrs to u.s. gaap in accordance with applicable accounting standards.o recalculated the selected conversion adjustments from ifrs to u.s. gaap.o tested the validity of the selected conversion adjustments through evaluation of documentary evidence and inquiry of management.o tested the translation of telesat’s financial information from canadian dollars to u.s. dollars.●we tested the calculation of the equity in net income of telesat recognized in the company’s financial statements for the year ended december 31, 2020. /s/ deloitte & touche llp new york, new york march 8, 2021we have served as the company's auditor since 1996.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.evaluation of the gift card breakage rate as discussed in notes 2(l) and 5 to the consolidated financial statements, the company’s liability for gift cards sold but not yet redeemed as of december 27, 2020 was $59.0 million. the liability represents the full value of all gift cards sold less the amount the company has recognized as income for gift cards that are not expected to be redeemed. the portion of gift cards sold to customers which are never redeemed is commonly referred to as gift card breakage. gift card breakage is estimated based on historical breakage rates, including breakage rates during previous economic recessions, while considering any changes in redemption patterns as a result of the current economic environment. we identified the evaluation of the gift card breakage rate as a critical audit matter. testing the gift card breakage rate involved a high degree of subjectivity, because future gift card usage may be different than historical experience and is subject to inherent uncertainty.the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. this included controls related to the company’s gift card process including the gift card issuance and redemption data used to develop the breakage rate. we assessed the company’s estimated breakage rate, including the underlying gift card issuance and redemption data. we f-2compared an independent acceptable range to the amount recorded by the company. we compared the historically estimated breakage, including breakage during previous economic recessions, against actual breakage to assess the company’s ability to accurately forecast gift card breakage. we analyzed redemptions as a percentage of sales to identify any changes in redemption patterns as a result of the current economic environment.evaluation of long-lived assets impairment as discussed in notes 2(j), 6, 7 and 8 to the consolidated financial statements, property and equipment, net, amortizing franchise rights, and operating lease right-of-use assets, were $119.9 million, $12.3 million and $188.4 million, respectively, as of december 27, 2020. the company tests for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. if the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. based upon the analyses performed primarily resulting from several coronavirus disease 2019 (covid-19) pandemic factors, including significant reduction in guest traffic at the restaurants, state and local government mandated restrictions including suspension of dine-in operations, and resulting changes in consumer behavior, the company recognized pre-tax impairment charges for long-lived assets of $12.7 million in fiscal year 2020.we identified the evaluation of long-lived assets for impairment as a critical audit matter. subjective auditor judgment was required to evaluate the forecasted sales, including the effects of the covid-19 pandemic and resulting duration of the economic downturn.the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. this included controls related to the company’s long-lived assets impairment process and a control related to the forecasted sales. to test the company’s impairment assessment, we evaluated the company’s ability to accurately forecast future sales by comparing the company’s forecasts to historical results, to actual results from take-out and delivery services, to actual results from restaurants that had resumed dine-in services, and to market and industry data. we performed sensitivity analyses over the forecasted sales to evaluate the change in the impairment analysis of each asset group resulting from changes in forecasted sales. /s/ kpmg llp we have served as the company’s auditor since 1994.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee of southern company's board of directors and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.impact of rate regulation on the financial statements – refer to note 1 (summary of significant accounting policies – regulatory assets and liabilities) and note 2 (regulatory matters) to the financial statements critical audit matter description southern company's traditional electric operating companies and natural gas distribution utilities (the "regulated utility subsidiaries"), which represent approximately 88% of southern company's consolidated operating revenues for the year ended december 31, 2021 and 86% of its consolidated total assets at december 31, 2021, are subject to rate regulation by their respective state public service commissions or other applicable state regulatory agencies and wholesale regulation by the federal energy regulatory commission (collectively, the "commissions"). management has determined that the regulated utility subsidiaries meet the requirements under accounting principles generally accepted in the united states of america to utilize specialized rules to account for the effects of rate regulation in the preparation of its financial statements. accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, including, but not limited to, property, plant, and equipment; other regulatory assets; other regulatory liabilities; other cost of removal obligations; deferred charges and credits related to income taxes; under and over recovered regulatory clause revenues; operating revenues; operations and maintenance expenses; and depreciation and amortization.the commissions set the rates the regulated utility subsidiaries are permitted to charge customers. rates are determined and approved in regulatory proceedings based on an analysis of the applicable regulated utility subsidiary's costs to provide utility service and a return on, and recovery of, its investment in the utility business. current and future regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investments, and the timing and amount of assets to be recovered by rates. the commissions' regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. while southern company's regulated utility subsidiaries expect to recover costs from customers through regulated rates, there is a risk that the commissions will not approve: (1) full recovery of the costs of providing utility service, or (2) full recovery of all amounts invested in the utility business and a reasonable return on that investment.we identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures (e.g., asset retirement costs, property damage reserves, and remaining net book values of retired assets) and the high degree of subjectivity involved in assessing the potential impact of future regulatory orders on the financial statements. management judgments include assessing the likelihood of (1) recovery in future rates of incurred costs, (2) a disallowance of part of the cost of recently completed plant or plant under construction, and/or (3) a refund to customers. given that management's accounting judgments are based on assumptions about the outcome of future decisions by the commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process due to its inherent complexities and significant auditor judgment to evaluate management estimates and the subjectivity of audit evidence.how the critical audit matter was addressed in the audit our audit procedures related to the uncertainty of future decisions by the commissions included the following, among others:•we tested the effectiveness of management's controls over the evaluation of the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. we also tested the effectiveness of management's controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.•we read relevant regulatory orders issued by the commissions for the regulated utility subsidiaries, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the commissions' treatment of similar costs under similar circumstances. we evaluated the external information and compared it to management's recorded regulatory asset and liability balances for completeness.ii-75 table of contents index to financial statements•for regulatory matters in process, we inspected filings with the commissions by southern company's regulated utility subsidiaries and other interested parties that may impact the regulated utility subsidiaries' future rates for any evidence that might contradict management's assertions.•we evaluated regulatory filings for any evidence that intervenors are challenging full recovery of the cost of any capital projects. we tested selected costs included in the capitalized project costs for completeness and accuracy.•we obtained representation from management regarding probability of recovery for regulatory assets or refund or future reduction in rates for regulatory liabilities to assess management's assertion that amounts are probable of recovery, refund, or a future reduction in rates.•we evaluated southern company's disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.disclosure of uncertainties – plant vogtle units 3 and 4 construction – refer to note 2 (regulatory matters – georgia power – nuclear construction) to the financial statements critical audit matter description as discussed in note 2 to the financial statements, the ultimate recovery of georgia power company's (georgia power) investment in the construction of plant vogtle units 3 and 4 is subject to multiple uncertainties. such uncertainties include the potential impact of future decisions by georgia power's regulators (particularly the georgia public service commission) and potential actions by the co-owners of the vogtle project. in addition, georgia power's ability to meet its cost and schedule forecasts could impact its ability to fully recover its investment in the project. while the project is not subject to a cost cap, georgia power's cost and schedule forecasts are subject to numerous uncertainties which could impact cost recovery, including ongoing or future challenges with management of contractors and vendors; subcontractor performance; supervision of craft labor and related productivity, particularly in the installation of electrical, mechanical, and instrumentation and controls commodities, ability to attract and retain craft labor, and/or related cost escalation; and procurement and related installation. new challenges may arise, particularly as units 3 and 4 move into initial testing and start-up, which may result in required engineering changes or remediation related to plant systems, structures, or components (some of which are based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale). the ongoing and potential future challenges described above may change the projected schedule and estimated cost.in addition, the continuing effects of the covid-19 pandemic could further disrupt or delay construction, testing, supervisory, and support activities at plant vogtle units 3 and 4. the ultimate recovery of georgia power's investment in plant vogtle units 3 and 4 is subject to the outcome of future assessments by management as well as georgia public service commission decisions in future regulatory proceedings. after considering the significant level of uncertainty that exists regarding the future recoverability of these costs since the ultimate outcome of these matters is subject to the outcome of future assessments by management, as well as georgia psc decisions in future regulatory proceedings, georgia power recorded pre-tax charges to income of $1.692 billion in 2021.in addition, management has disclosed the status, risks, and uncertainties associated with plant vogtle units 3 and 4, including (1) the status of construction; (2) the status of regulatory proceedings; (3) the status of legal actions or issues involving the co-owners of the project; and (4) other matters which could impact the ultimate recoverability of georgia power's investment in the project. we identified as a critical audit matter the evaluation of georgia power's identification and disclosure of events and uncertainties that could impact the ultimate cost recovery of its investment in the construction of plant vogtle units 3 and 4. this critical audit matter involved significant audit effort requiring specialized industry and construction expertise, extensive knowledge of rate regulation, and difficult and subjective judgments.how the critical audit matter was addressed in the audit our audit procedures related to georgia power's identification and disclosure of events and uncertainties that could impact the ultimate cost recovery of its investment in the construction of plant vogtle units 3 and 4 included the following, among others:•we tested the effectiveness of internal controls over the on-going evaluation, monitoring, and disclosure of matters related to the construction and ultimate cost recovery of plant vogtle units 3 and 4.•we involved construction specialists to assist in our evaluation of the reasonableness of the projected in-service dates for plant vogtle units 3 and 4 and georgia power's processes for on-going evaluation and monitoring of the construction schedule and to assess the disclosures of the uncertainties impacting the ultimate cost recovery of its investment in the construction of these units.•we attended meetings with georgia power and southern company officials, project managers (including contractors), independent regulatory monitors, and co-owners of the project to evaluate and monitor construction status and identify cost and schedule challenges.ii-76 table of contents index to financial statements•we read reports of external independent monitors employed by the georgia public service commission to monitor the status of construction at plant vogtle units 3 and 4 to evaluate the completeness of georgia power's disclosure of the uncertainties impacting the ultimate cost recovery of its investment in the construction of plant vogtle units 3 and 4.•we inquired of georgia power and southern company officials and project managers regarding the status of construction, the construction schedule, and cost forecasts to assess the financial statement disclosures with respect to project status and potential risks and uncertainties to the achievement of such forecasts.•we inspected regulatory filings and transcripts of georgia public service commission hearings regarding the construction and cost recovery of plant vogtle units 3 and 4 to identify potential challenges to the recovery of georgia power's construction costs and to evaluate the disclosures with respect to such uncertainties.•we inquired of georgia power and southern company management and internal and external legal counsel regarding any potential legal actions or issues arising from project construction or issues involving the co-owners of the project.•we monitored the status of reviews and inspections by the nuclear regulatory commission to identify potential impediments to the licensing and commercial operation of the project that could impact the ultimate cost recovery of plant vogtle units 3 and 4.•we compared the financial statement disclosures relating to this matter to the information gathered through the conduct of all our procedures to evaluate whether there were omissions relating to significant facts or uncertainties regarding the status of construction or other factors which could impact the ultimate cost recovery of plant vogtle units 3 and 4.•we obtained representation from management regarding disclosure of all matters related to the cost and/or status of the construction of plant vogtle units 3 and 4, including matters related to a co-owner or regulatory development, that could impact the recovery of the related costs./s/ deloitte & touche llp atlanta, georgia february 16, 2022we have served as southern company's auditor since 2002.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which it relates.revenue recognition – refer to note 2 to the financial statements critical audit matter description the company’s wholly-owned subsidiary, faneuil, inc. (“faneuil”), is a provider of call center services, back-office operations, staffing services, and toll collection services to government and regulated commercial clients across the united states. as discussed in note 2 to the financial statements, faneuil customer contracts often include promises to transfer multiple products and services to its customers. specifically, faneuil performs implementation activities in connection with newly executed customer contracts. significant judgment is required in determining whether implementation activities represent distinct performance obligations.we identified revenue recognition for newly executed faneuil customer contracts as a critical audit matter given the judgments necessary for management to determine (1) whether implementation activities represent distinct performance obligations, and (2) the accuracy of the allocation of the contract consideration to individual performance obligations. performing audit procedures to evaluate the company’s identification of performance obligations and the accuracy of the allocation of consideration to performance obligations for newly executed faneuil customer contracts required a high degree of auditor judgment. f-2table of contents how the critical audit matter was addressed in the audit our audit procedures related to the evaluation of the company’s conclusions with respect to revenue recognition for newly executed faneuil customer contracts included the following, among others: •we evaluated the reasonableness of management’s significant accounting policies related to revenue recognition for implementation activities. •for each newly executed customer contract, we performed the following procedures: -obtained and read the customer contract. -tested management’s identification of distinct performance obligations based on our evaluation of the contract terms and the applicable accounting guidance. -tested the accuracy of management’s determination of the contract consideration based on the contract terms. -tested the accuracy of the allocation of contract consideration to each performance obligation based on the estimated relative standalone selling price of each performance obligation considering (1) the relative cost incurred in satisfying each respective performance obligation, and (2) an evaluation of the margin realized through satisfaction of the performance obligation relative to the margin realized through the satisfaction of other performance obligations within the newly executed contract and under comparable contracts. /s/ deloitte & touche llp jericho, new york december 20, 2021 we have served as the company’s auditor since 2019.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. asbestos- refer to notes 1 and 14 to the financial statements critical audit matter description the corporation is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four decades. the corporation expects more asbestos-related suits to be filed against the corporation and its former subsidiary amchem products, inc. in the future, and will aggressively defend or reasonably resolve, as appropriate, both pending and future claims. since 2003, the corporation has engaged a third-party actuarial specialist to review the corporation's historical asbestos-related claim and resolution activity in order to assist management in estimating the corporation's asbestos-related liability. the corporation considers quantitative and qualitative factors such as the nature of pending claims, trial experience of the corporation and 23table of contentsother asbestos defendants, current spending for defense and processing costs, significant appellate rulings and legislative developments, trends in the tort system, and their respective effects on expected future resolution costs. the corporation considers the following summarized assumptions and judgments in arriving at the estimated liability:•the average resolution value calculated by the corporation to settle each pending and future claim•the corporation’s estimation of the number of pending and future claims•the curve of how claims will occur over the estimated period through the terminal year•the estimated terminal year 2049 (date at which future claims will cease)•the acceptance rate applied to estimated future claims (the rate at which claims will be resolved with payment)given the significant judgments made by management to estimate the asbestos liability, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to average resolution value of pending and future claims, curve of how claims will occur, and estimated terminal date required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists. how the critical audit matter was addressed in the audit our audit procedures related to management’s estimate and assumptions of the asbestos liability included the following, among other procedures:•we tested the effectiveness of controls related to the asbestos liability including management’s controls over the determination of average resolution value of pending and future claims, estimated number of claims, valuation of future claims, curve of how claims will occur, the estimated terminal date and the acceptance rate applied to estimated future claims. •we evaluated the methods and assumptions used by management to estimate the asbestos liability by:◦testing the underlying data that served as the basis for the actuarial analysis, including historical claims, to test that the inputs to the actuarial estimate were reasonable.◦comparing management’s prior-year assumptions of expected development and ultimate loss to actuals incurred during the current year to identify potential bias in the determination of the asbestos-related liabilities.•with the assistance of our actuarial specialists, we independently developed scenario-adjusted estimates of the asbestos-related liabilities, including loss data and industry claim development factors, and compared our estimates to management’s estimates.•we read external information included in regulatory filings and news releases to search for contradictory evidence. /s/ deloitte & touche llp midland, michigan february 4, 2022we have served as the corporation's auditor since 2001.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.regulatory assets and liabilities - impact of rate regulation on the financial statements — refer to notes 4 and 10 to the financial statements.critical audit matter description the company is subject to rate regulation by state utility regulatory agencies, which have jurisdiction with respect to the rates of electric transmission and distribution companies in new mexico and texas. the company is also subject to the jurisdiction of the federal energy regulatory commission for its wholesale electric operations, accounting practices, wholesale sales for resale, transmission of electricity in interstate commerce, compliance with north american electric reliability corporation standards, asset transactions and mergers and natural gas transactions in interstate commerce, (collectively with state utility regulatory agencies, the “commissions”). management has determined it meets the requirements under accounting principles generally accepted in the united states of america to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. accounting for the economics of rate regulation affects multiple financial statement line items and disclosures, including property, plant and equipment, regulatory assets and liabilities, operating revenues and expenses, and income taxes.the company is subject to regulatory rate setting processes. rates are determined and approved in regulatory proceedings based on an analysis of the company’s costs to provide utility service and a return on, and recovery of, the company’s investment in assets required to deliver services to customers. accounting for the company’s regulated operations provides that rate-regulated entities report assets and liabilities consistent with the recovery of those incurred costs in rates, if it is probable that such rates will be charged and collected. the commissions’ regulation of rates is premised on the full recovery of incurred costs and a reasonable rate of return on invested capital. decisions by the commissions in the future will impact the accounting for regulated operations, including decisions about the amount of allowable costs and return on invested capital included in rates and any refunds that may be required. in the rate setting process, the company’s rates result in the recording of regulatory assets and liabilities based on the probability of future cash flows. regulatory assets generally represent incurred or accrued costs that have been deferred because future recovery from customers is probable. regulatory liabilities generally represent amounts that are expected to be refunded to customers in future rates or amounts collected in current rates for future costs. 20table of contents we identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory orders on the financial statements. management judgments include assessing the likelihood of (1) recovery in future rates of incurred costs, (2) a disallowance of part of the cost of recently completed plant, and 3) a refund due to customers. given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process due to its inherent complexities.how the critical audit matter was addressed in the audit our audit procedures related to the uncertainty of future decisions by the commissions included the following, among others:•we tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future rates of costs deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. we also tested the effectiveness of management’s controls over the recognition of regulatory assets or liabilities and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.•we evaluated the company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.•we read relevant regulatory orders issued by the commissions for the company, regulatory statutes, interpretations, procedural schedules and memorandums, filings made by intervenors, experts’ testimony and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the commissions’ treatment of similar costs under similar circumstances. we also evaluated regulatory filings for any evidence that intervenors are challenging full recovery of the cost of any capital projects. if the full recovery of project costs is being challenged by intervenors, we evaluated management’s assessment of the probability of a disallowance. we evaluated the external information and compared to the company’s recorded regulatory assets and liabilities for completeness.•we obtained management’s analysis and correspondence from counsel, as appropriate, regarding regulatory assets or liabilities not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery or a future reduction in rates. /s/ deloitte & touche llp minneapolis, minnesota february 23, 2022we have served as the company’s auditor since 2002.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.government-mandated rebates - medicaid as described in note 1 to the consolidated financial statements, the company records product sales net of estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns and other deductions. accruals are established for these deductions, and actual amounts are offset against applicable accruals. as disclosed by management, amounts accrued for rebates and chargebacks as of december 31, 2020 are $44.2 million, with the most significant portion of the accrual balance related to adcetris medicaid rebates. management estimates medicaid rebates using the expected value approach, based on a variety of factors, including payor mix and experience to-date. management also reviews historical rebate information to further refine these estimates. the principal considerations for our determination that performing procedures relating to government-mandated rebates – medicaid is a critical audit matter are (i) the significant judgment by management when determining the rebate estimate and (ii) the high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s estimate and significant assumptions related to payor mix and estimated purchases covered by the various state medicaid programs. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the various state medicaid programs, including controls over the assumptions used to estimate the rebate. these procedures also included, among others, (i) testing management’s process for determining the rebate estimate; (ii) evaluating the appropriateness of management’s model; (iii) testing the completeness and accuracy of the underlying data used by management; and (iv) evaluating the significant assumptions used by management including payor mix and estimated purchases covered by the various state medicaid programs. evaluating management’s assumptions involved evaluating whether the assumptions were reasonable considering (i) the consistency of the historical covered purchases and rebate processing times; (ii) expansion of state medicaid programs; (iii) comparing assumptions to other industry data; (iv) testing of actual rebate claims processed by the company; and (v) whether these assumptions were consistent with evidence obtained in other areas of the audit./s/ pricewaterhouse coopers llp seattle, washington february 11, 2021we have served as the company’s auditor since 1998.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicated the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. f-3table of contents self-insurance loss reserves description of the matter the liability for self-insurance loss reserves totaled $66.2 million at december 31, 2019 which includes self-insurance reserves for vehicle liability claims. the long-term portion of this liability was included in “other long-term liabilities,” and the remainder was included in “insurance and claims” on the company’s balance sheets. as more fully described in note 1 to the consolidated financial statements, the self-insurance reserves include estimates for both known claims and future claims development and are based on company-specific and industry data, as well as general economic information.auditing the company’s self-insurance reserves for vehicle liability claims was complex, highly subjective and required significant judgment due to the actuarial techniques and significant assumptions used. the company utilizes actuarial analyses to evaluate open claims and estimate the ongoing development exposure. the most significant assumptions used in the estimation process include determining the trend in loss costs, the expected consistency in the frequency and severity of claims incurred but not yet reported, changes in the timing of the reporting of losses from the loss date to the notification date, and the expected costs to settle unpaid claims.how we addressed the matter in our audit we tested internal controls over management’s review of the completeness and accuracy of data inputs used in the actuarial analysis and review of the actuarial assumptions and reserve calculations.to test the self-insurance loss reserves for vehicle liability claims, our audit procedures included, among others, evaluating the methodologies used and the significant actuarial assumptions discussed above, as well as performing substantive procedures over underlying data and calculations used in the analyses. we tested claims data by agreeing the data to supporting source documentation and payment information. we evaluated whether changes to the reserves for known claims were being recognized timely based on the underlying available data and current estimates. we involved actuarial specialists to assist in our evaluation of the actuarial methodologies used as well as to independently calculate a range of reserve estimates for comparison to the recorded reserves. accounting for acquisitions description of the matter during 2019, the company acquired certain net assets of fsa logistix (“fsa”) and o.s.t. logistics, inc. and o.s.t. trucking co., inc. (together referred to as “o.s.t.”) for total net consideration of $39 million and a potential earnout of up to $15 million, as disclosed in note 2 to the consolidated financial statements. these transactions were accounted for as business combinations.auditing the company's accounting for its business combinations was complex due to the significant estimation required by management to determine the fair value of the acquired assets and liabilities, especially the customer relationship intangible assets of $23.6 million and the contingent consideration liability of $11.8 million. the significant estimation was primarily due to the complexity of the valuation models used by management to measure the fair value of the customer-related intangible assets and the contingent consideration liability and the sensitivity of the respective fair values to changes in the significant underlying assumptions. the company used a discounted cash flow model to measure the customer-related intangible assets. the significant assumptions used to estimate the value of the intangible assets included discount rates and certain assumptions that form the basis of the forecasted results (e.g., revenue growth rates, operating profit margin and customer attrition rates). the company used a monte carlo simulation to measure the contingent consideration. the significant assumptions used in the simulation included volatility, discount rate, revenue projections and timing of expected payments. these significant assumptions are forward looking and could be affected by future economic and market conditions.f-4table of contents how we addressed the matter in our audit we tested the company's controls over its accounting for acquisitions. for example, we tested controls over the recognition and measurement of consideration transferred (including contingent consideration) and customer-related intangible assets acquired, including management review controls over the valuation models and underlying assumptions used to develop such estimates.to test the estimated fair value of the customer-related intangible assets, we performed audit procedures that included, among others, evaluating the company's use of the income approach (the excess earnings method) and testing the significant assumptions used in the model, including the completeness and accuracy of the underlying data. for example, we compared the significant assumptions to current industry, market and economic trends, assumptions used to value similar assets in other acquisitions, historical results of the acquired business, and other guidelines used by companies within the same industry. we involved our valuation specialists to assist in our evaluation of the significant assumptions and to assist with reconciling the prospective financial information with other prospective financial information prepared by the company. to test the fair value of the contingent consideration, we performed audit procedures that included, among others, assessing the terms of the arrangement, including the conditions that must be met for the contingent consideration to become payable. we also involved our valuation specialists to assist in evaluating the company's use of a monte carlo simulation and testing the significant assumptions used in the model, including the completeness and accuracy of the underlying data. for example, we compared the significant assumptions to current industry, market and economic trends and to the company's budgets and forecasts. for the customer-related intangible assets, we also performed a sensitivity analysis of the significant assumptions to evaluate the change in the fair values that would result from changes in the assumptions. /s/ ernst & young llp we have served as the company‘s auditor since 1991.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.regulatory accounting - refer to notes 2 and 7 to the financial statements critical audit matter description the company is subject to rate regulation by the public utility commission of oregon (the opuc), which has jurisdiction with respect to the rates for retail electricity in the state of oregon. management has determined it meets 64table of contentsthe requirements under accounting principles generally accepted in the united states of america to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as electric utility plant; regulatory assets and liabilities; operating revenues; operation and maintenance expense; income taxes; and depreciation expense.the company’s rates for retail customers are determined and approved in regulatory proceedings based on an analysis of the company’s cost of providing service to retail customers. the opuc has the authority to disallow the recovery of any costs that it considers imprudently incurred. although the opuc is required to establish customer prices that are fair, just and reasonable, it has significant discretion in the interpretation of this standard. we identified the impact of rate regulation as a critical audit matter due to its pervasive impact on the company’s financial statements and the significant judgments made by management to support its assertions about impacted account balances and disclosures. given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the opuc, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process.how the critical audit matter was addressed in the audit our audit procedures related to the uncertainty of future decisions by the opuc included the following, among others:•we tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future rates of costs deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. we also tested the effectiveness of management’s controls over the evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a refund or future reduction in rates.•we evaluated the company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.•we read relevant regulatory orders issued by the opuc for the company, regulatory statutes, and other publicly available information to assess the likelihood of recovery in future rates or of a refund or future reduction in rates. •for selected regulatory assets and liabilities, we evaluated whether management had determined such amounts in accordance with the regulatory orders. /s/ deloitte & touche llp portland, oregon february 18, 2021we have served as the company’s auditor since 2004.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.valuation of the multi-channel video programming distributors (“mvpd”) customer relationships intangible assets acquired in the regional sports networks acquisition as described in note 2 to the consolidated financial statements, the company completed the regional sports networks acquisition in 2019, which resulted in $5.4 billion of customer relationship intangible assets being recorded, primarily relating to mvpd customer relationships. management estimated the fair value of the mvpd customer relationships intangible assets acquired using the income approach, which involved the use of significant estimates and assumptions with respect to the projected revenue, projected margins, and the discount rate used to present value future cash flows. the principal considerations for our determination that performing procedures relating to the valuation of the mvpd customer relationships intangible assets acquired in the regional sports networks acquisition is a critical audit matter are there was significant judgment by management when developing the fair value measurement of the mvpd customer relationships intangible assets. this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the significant assumptions used by management, including projected revenue and the discount rate. the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the mvpd customer relationships intangible assets and controls over the development of the assumptions related to the valuation of the intangible assets, including projected revenue and the discount rate. these procedures also included, among others, (i) reading the purchase agreement, (ii) testing management’s process for estimating the fair value of the mvpd customer relationships intangible assets, (iii) evaluating the appropriateness of the income approach used to value the intangible assets, (iv) testing the completeness, accuracy, and relevance of underlying data used in the income approach, and (v) evaluating the significant assumptions used by management, which included projected revenue and the discount rate. evaluating the reasonableness of the projected revenue used in the fair value estimate involved considering the past performance of the acquired business, as well as economic and industry forecasts. the discount rate was evaluated by considering the cost of capital of comparable businesses as well as other industry factors. professionals with specialized skill and knowledge were used to assist in the evaluation of the company's income approach and the discount rate significant assumption./s/ pricewaterhouse coopers llp baltimore, maryland march 2, 2020we have served as the company’s auditor since 2009.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. business combination – village inn & bakers square and tahoe joe’s the company acquired village inn & bakers square and tahoe joe’s restaurants (collectively referred to as the “acquirees”) in fiscal year 2021. the company accounted for the acquisitions using the acquisition method of accounting for business combinations. accordingly, the acquisition price was allocated to the assets acquired and liabilities assumed based on their respective fair values at the acquisition date. the company estimated the fair value of the intangible assets acquired, most notably the trade names/trademarks, using the relief from royalty method, which is a discounted cash flow method. the fair value determination of the trade names/trademarks intangible assets required management to make significant estimates and assumptions related to forecasted future cash flows, including the selection of royalty rates, terminal growth rates, and discount rates. we identified the trade names/trademarks intangible assets as a critical audit matter because of the significant estimates and assumptions management made to fair value these assets. this required a high degree of auditor judgment and an increased extent of effort, including the involvement of our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s forecasts of future cash flows, including the selection of royalty rates, terminal growth rates, and discount rates. our audit procedures related to the forecasts of future cash flows and the selection of the royalty rates, terminal growth rates, and discount rates for the trade names/trademarks intangible assets included the following, among others: - assessing the reasonableness of fiscal year forecasted cash flows of revenues and operating margins by comparing them to the acquirees’ actual cash flows. - assessing the reasonableness of the forecasted revenue growth rates and operating margins over the cash flow forecast period by comparing them to the acquirees’ actual revenue growth rates and operating margins during the most recent historical periods. - performing sensitivity analyses of the significant assumptions used in the valuation model to evaluate the change in fair value resulting from changes in the significant assumptions. - with the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodologies; (2) royalty rates by testing the source information used to compare market royalty rates associated with comparable licensing agreements; (3) terminal growth rates by comparing them to industry growth rates and the projected nominal gross domestic product (gdp) growth rate; and (4) discount rates, which included testing the source information f-2table of contentsunderlying the determination of the discount rates, testing the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management. /s/ schechter, dokken, kanter, andrews & selcer, ltd. we have served as the company’s auditor since 2020.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. f-2table of contents indefinite-lived trade name impairment assessment as described in notes 1 and 4 to the consolidated financial statements, the company’s indefinite-lived trade name balance was $8,400,000 as of january 1, 2022. indefinite-lived intangible assets are tested for impairment annually during the fourth fiscal quarter and whenever events or circumstances may indicate that an impairment has occurred. the fair value of the indefinite-lived trade name is generally estimated using discounted cash flow methodologies. the discounted cash flow methodology requires significant judgment, including estimation of future revenue, which is dependent on internal forecasts, the estimation of the long-term revenue growth rate of the company’s business, the determination of the company’s weighted average cost of capital, and royalty rates. we identified the company’s indefinite-lived trade name impairment assessment as a critical audit matter because of the significant assumptions and judgments made by management when estimating the fair value of the indefinite-lived trade name. auditing management’s assumptions and judgments regarding future revenues, the weighted average cost of capital, and the royalty rate involved a high degree of auditor judgment and an increased effort, including the use of our valuation specialists. our audit procedures related to future revenues, royalty rate, and the weighted average cost of capital utilized in the valuation of the company’s indefinite-lived trade name included the following, among others: -with the assistance of our valuation specialists, we evaluated the reasonableness of the weighted average cost of capital and tested the relevance and reliability of source information underlying the determination of the rates, tested the mathematical accuracy of the calculation, and evaluated the reasonableness of the royalty rate selected by management. -we evaluated the reasonableness of future revenues by:o comparing management’s forecasts to historical results for the company. o comparing management’s forecasts to third-party industry data.-we evaluated the impact of changes to revenue forecasts and revenue growth rates on the fair value of the indefinite-lived trade name. deferred tax asset valuation allowance as described in note 6 to the consolidated financial statements, the company’s gross deferred tax asset and valuation allowance was $5,800,000 and $5,800,000, respectively, as of january 2, 2021. the company recognizes deferred income taxes for differences between the financial reporting and tax basis of assets and liabilities. deferred tax assets include loss and credit carryforwards and are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion of the deferred tax assets will not be realized. the company regularly reviews the deferred tax assets for recoverability considering historical profitability, projected taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. the principal considerations for our determination that performing procedures relating to management’s determination of the value of deferred tax assets is a critical audit matter are that there is significant judgment by management in the determination that it is not more likely than not that sufficient taxable income will be generated to realize deferred tax assets and therefore a valuation allowance was recorded, and auditing the valuation of deferred tax assets involved especially subjective judgment. our audit procedures related to the determination that it is not more likely than not that sufficient taxable income will be generated to realize deferred tax assets included the following, among others: -we evaluated the reasonableness of management’s estimates of future taxable income by considering the weight applied to negative evidence and positive evidence that is objectively verifiable. -we evaluated the company’s “more likely than not” conclusion with regard to deferred tax assets that are not considered realizable and recomputed the valuation allowance for those that were not considered realizable. /s/ rsm us llp we have served as the company's auditor since 2010.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.warranty liability - refer to “note 1 -warranty liabilities” critical audit matter description the company provides a limited warranty on most products sold. the estimated warranty liabilities, which are expensed at the time of sale and included in cost of sales, are based on historical trends and warranty claim rates incurred and the assumptions are adjusted for any current trends as appropriate. as of january 1, 2022, the company has warranty liability of $10.1 million.we identified the warranty liability as a critical audit matter because of the significant judgments made by management to estimate warranty claim rates. this required a high degree of auditor judgment and an increased extent of effort when 43 | 2021 form 10-ksleep number corporatio nperforming audit procedures to evaluate the reasonableness of management’s estimates of future warranty claims based on historical claims paid, from which management uses to develop warranty liability estimates.how the critical audit matter was addressed in the audit our procedures related to the warranty liabilities included the following, among others:•we tested the effectiveness of controls related to warranty liabilities, including those over historical warranty claim data and estimated future warranty claim rates.•we evaluated the reasonableness of management’s estimate of warranty liabilities by comparing the historical warranty claim trends to the current warranty claim rates of the sleep number 360 smart bed line and other products.•we evaluated the completeness of the warranty liabilities through inquiries of operational and executive management regarding knowledge of known product warranty claims or product issues and evaluated whether they were appropriately considered in the determination of the warranty liabilities.•we evaluated the methods and assumptions used by management to estimate the warranty liabilities by:–testing the underlying data that served as the basis for the estimate, to test that the inputs to the estimate were reasonable and to test the mathematical accuracy of the calculation.–developing an expectation of warranty liabilities and comparing it to the recorded balance. –comparing management’s prior-year assumption of expected claim rates to actuals incurred during the year to evaluate management’s ability to estimate the warranty liabilities./s/ deloitte & touche llp minneapolis, minnesota march 1, 2022we have served as the company’s auditor since 2010.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.evaluation of sufficiency of audit evidence over revenue as discussed in notes 2 and 5 to the consolidated financial statements, the company has recorded $1,179.0 million in revenues, of which $812.7 million was related to licensed-based products, $211.6 was related to asset-based products, and $154.7 was related to transaction-based products, for the year ended december 31, 2019. these disaggregated portions of revenue contain multiple product revenue streams. the company’s process to account for and recognize revenue differs between certain revenue streams. we identified the evaluation of the sufficiency of audit evidence over revenue as a critical audit matter. evaluating the sufficiency of audit evidence obtained required especially subjective auditor judgment due to the multiple product revenue streams and the use of multiple processes to account for and recognize revenue. this included determining the revenue streams where procedures were performed and the nature and extent of audit evidence obtained over each revenue stream. the primary procedures we performed to address this critical audit matter included the following. we used auditor judgment to determine the nature and extent of procedures to be performed, including the determination of the revenue streams over which those procedures were performed. for product revenue streams where procedures were performed, we: •tested certain internal controls over the company’s revenue recognition processes;•evaluated the company’s revenue recognition accounting policies; •selected a sample of revenue transactions and assessed recorded amounts by comparing them for consistency with underlying documentation, including the customer contract; and, •evaluated the revenue transactions for consistency with the company’s accounting policies, as applicable, including timing of revenue recognition in addition, we evaluated the overall sufficiency of audit evidence obtained over revenue.evaluation of acquisition-date fair value of the customer relationship intangible asset as discussed in note 8 to the consolidated financial statements, on july 2, 2019 the company acquired ratings acquisition corp (“dbrs”) in a business combination for total cash consideration of $682.1 million. as an element of the transaction, the company acquired customer relationship intangible assets related to credit rating customers. the acquisition-date fair value for the customer relationship intangible asset was $219.1 million.we identified the evaluation of the acquisition-date fair value of the customer relationship intangible asset as a critical audit matter. there was a high degree of subjectivity involved in evaluating key assumptions in the company’s income approach methodology used to determine fair value, including: •forecasted revenue growth rates•estimated customer attrition rates•forecasted earnings before interest, taxes, depreciation and amortization (ebitda) margin•estimated discount rates69table of contents the primary procedures we performed to address this critical audit matter included the following. we tested certain internal controls over the company’s process to determine the acquisition-date fair value of the customer relationship intangible asset, including controls over the evaluation of each key assumption. we evaluated the company’s forecasted revenue growth rates by comparing to those of the company’s relevant peers when considering the nature of the acquired dbrs business and to historical actual results. we compared the estimated customer attrition rates to the implied attrition developed using the useful lives of customer relationship assets disclosed by market participants. we compared the company’s forecasted ebitda margins to historical actual results. we involved valuation professionals with specialized skills and knowledge who assisted in evaluating: •the valuation methodology used by the company to determine the fair value of the customer relationship intangible asset;•the company’s estimated discount rates by comparing to publicly available market data for comparable companies;•the company’s estimated customer attrition rates and assessed them by considering publicly available market data for comparable companies./s/ kpmg llp we have served as the company’s auditor since 2011.

critical audit matter the critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. segment reporting as described in note 1 to the consolidated financial statements, the company has historically disclosed two reportable segments, direct and retail. as a result of the company’s continued growth of its omnichannel distribution network, resulting in a consistent online and in-store customer experience, and in conjunction with an assessment of the similarities of qualitative and quantitative characteristics between the two former reportable segments, the company has determined that the historical structure of separate reportable segments for direct and retail is no longer representative. therefore, as of february 3, 2020, the company updated its segment reporting to one reportable segment. we identified the aggregation of reportable segments as a critical audit matter. the principal considerations for our determination that the aggregation of reportable segments is a critical audit matter are the qualitative and economic aggregation criteria and the appropriate period in which to reflect the change, which involved significant management judgment. as such, auditing this change required a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures. ‎ 40 table of contents our audit procedures related to the aggregation of reportable segments included the following, among others: we tested the company’s internal control specific to management’s periodic assessment of the identification and disclosure of reportable segments. following management’s conclusion that an updated assessment was necessary relative to reportable segments, we tested the company’s accounting analysis control that included the factors specified below. in consultation with our national office resources, we evaluated the time period in which management concluded it was appropriate to aggregate and disclose the two previously disclosed reportable segments. this included evaluating the continued maturation of the company as an omni-store business, as well as the evolution of various omni-store initiatives that have been implemented by the company including buy online and pick up in-store and ship from store. our consultation included the following: o we considered our experience as the company’s auditor of record in evaluating management’s identification of the chief executive officer as the chief operating decision maker (“codm”). o we corroborated management’s conclusion that the company’s operating segments consist of direct and retail through the report that is periodically provided to the codm to assist with business decisions. o we evaluated management’s assessments related to the qualitative and economic aggregation criteria that were considered to aggregate two previously disclosed reportable segments. the qualitative criteria we evaluated included (i) the nature of the company’s products and services, (ii) the nature of the company’s production process, (iii) the type of customer that the company targets, and (iv) the methods used to distribute the company’s products. the quantitative criteria we evaluated included (i) the mix of product sales between the aggregated components, and (ii) the similarity of long-term gross margins of the aggregated components. we corroborated management’s conclusions through our understanding of the company’s products and customers and audited historical financial data. o we assessed management’s presentation and disclosure against the objectives and principles outlined in relevant accounting literature. /s/ grant thornton llp we have served as the company’s auditor since 2002.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 64table of contents allowance for estimated losses on loans/leases as explained in note 1 and note 4 of the consolidated financial statements, the allowance for estimated losses on loans/leases (allowance), totaling $84.4 million at december 31, 2020, is an estimate based upon management’s periodic review of the collectability of the loans/leases in light of historical experience, the nature and volume of the loan/lease portfolio, adverse situations that may affect the borrower’s/lessee’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. the evaluation by the company is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. the allowance consists of two components: the valuation allowance for loans/leases individually evaluated for impairment (specific component), which represents $2.7 million, and the valuation allowance for loans/leases collectively evaluated for impairment (general component), which represents $81.7 million. the company’s general component includes a quantitative allowance based upon historical charge-off experience derived from the company’s internal risk rating process, as well as a qualitative component for factors not reflected in the historical loss experience. the qualitative factors are determined based on an assessment of internal and/or external influences on credit quality that are not fully reflected in the historical loss or risk rating data. the evaluation of these qualitative factors requires that management make significant judgements regarding these factors, which may significantly impact the estimated allowance. we identified the qualitative factors applied to the general component of the allowance as a critical audit matter as auditing management’s determination of these involved a high degree of auditor judgement given the highly subjective nature of management’s judgments. our audit procedures related to the company’s qualitative factors in the general component of the allowance included the following, among others: ●we obtained an understanding of the relevant controls related to the qualitative factors of the general component and tested such controls for design and operating effectiveness, including controls relating to management’s review and approval of the qualitative factors and the data used in determining those factors. ●we tested management’s process and evaluated the reasonableness of their judgements and assumptions to develop the qualitative factors, which included: o testing the accuracy of the data inputs used by management as a basis for the adjustments for qualitative factors by comparing to internal and external source data and assessing the reasonableness of the magnitude and directional consistency of the adjustments for such. o evaluating whether management’s conclusions were consistent with company provided internal data and external, independently sourced data and agreeing the impact to the allowance calculation. goodwill impairment at december 31, 2020, the company’s goodwill totaled $74.1 million. as explained in note 1 of the consolidated financial statements, impairment testing is performed annually at november 30th, with additional tests, if necessary, due to certain triggering events. the initial recognition of goodwill and subsequent impairment analysis requires the company to make subjective judgments concerning estimates of how the acquired assets will perform in the future using valuation methods, which may include using the current market price of stock or discounted cash flow analyses. the company assesses the valuation of goodwill at the reporting unit level. the assessment of goodwill impairment is complex due to the judgments and assumptions used in the reporting unit impairment tests as well as the inputs to the valuation models. management’s decision on the inputs and assumptions in the valuations could have a significant effect on the consolidated balance sheets and net income if impairment is recognized. 65table of contents we identified the valuation of goodwill as a critical audit matter because of certain significant assumptions management makes in determining the estimate, including cash flow projections, the discount rate, public market comparables, multiples of recent mergers and acquisitions of similar businesses and the control premium. auditing management’s estimates of these assumptions involved a high degree of auditor judgment and increased audit effort, including the use of internal valuation specialists, as changes in these assumptions could have a significant impact on the fair value of the applicable reporting unit(s) and potential impairment charges. our audit procedures related to the company’s impairment tests of goodwill included the following, among others: ●we obtained an understanding of the relevant controls related to the review of the fair value of the various reporting units and potential impairment charges, which included the development of cash flow projections, the discount rate, public market comparables, multiples of recent merger and acquisitions of similar businesses and the control premium, and tested such controls for design and operating effectiveness. ●we evaluated the reasonableness of management’s cash flow projections by comparing management’s prior projections to historical results for the company. ●we utilized an internal valuation specialist to assist, as applicable, for the interim and annual impairment tests, as follows in: o reviewing the calculations for mathematical accuracy and evaluating if the computation methods were appropriate. o developing estimates of the discount rate, public market comparables, multiples of recent mergers and acquisitions and the control premium based on publicly available market data, incorporating into the valuation and comparing the resulting reporting unit fair values to management’s estimates. /s/ rsm us llp we have served as the company's auditor since 1993.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. 46 goodwill and intangible asset impairment as described in notes 2 and 7 to the consolidated financial statements, the company’s consolidated goodwill and intangible asset balances were $61.5 million and $16.0 million, respectively, at january 30, 2021. for the year ended january 30, 2021, there was no impairment of goodwill and the impairment of intangible assets recognized by the company was immaterial. the company has an option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. if management chooses not to perform the qualitative test or determines that it is more likely than not that the fair value of the reporting unit is less than the carrying amount, the company’s evaluation of impairment of goodwill and intangible assets requires a comparison of the reporting unit’s and intangible asset’s fair value to their carrying value. if the fair value of the reporting unit or intangible asset is lower than the carrying value, then the company records an impairment in the amount equal to the excess, not to exceed the carrying value.the determination of the fair value of the reporting unit and intangible assets requires management to make significant estimates, complex judgments, and assumptions. these assumptions include forecasts of future sales and cash flows, long-term growth rates, weighted average cost of capital, valuation ratios derived from market transactions of similar companies, and royalty rates.given the company’s evaluation of impairment of goodwill and intangible assets requires management to make significant assumptions, performing audit procedures to evaluate whether management appropriately determined the fair value of the reporting unit and intangible assets required a high degree of auditor judgment. in addition, our audit effort included the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. the primary procedures we performed to address this critical audit matter included: •testing the effectiveness of controls relating to management’s goodwill and intangible asset impairment tests, including controls over the determination of the fair value of the europe reporting unit and related intangible assets. •testing management’s process for determining the fair value of the europe reporting unit and related intangible assets. we evaluated the reasonableness of management’s forecasts of future revenue by comparing these forecasts to historical operating results of the company as well as comparing to subsequent forecasts to evaluate for changes made subsequent to the annual impairment measurement date. •utilizing a valuation specialist to assist in testing the company’s income and market approach models for the europe reporting unit and relief from royalty method for intangible assets and certain related significant assumptions. •evaluating whether the assumptions used were reasonable by considering the past performance of the reporting unit and third-party market data, and whether such assumptions were consistent with evidence obtained in other areas of the audit. store asset impairment as described in notes 2 and 6 to the consolidated financial statements, the company’s consolidated fixed assets, net balance was $98.4 million and operating lease right-of-use asset was $267.2 million as of january 30, 2021. as disclosed in note 12, the company recognized a long-lived assets impairment loss of $1.4 million for fixed assets, net and $3.4 million for operating lease right-of-use assets for the year ended january 30, 2021. the company evaluates the carrying value of long-lived assets or asset groups (defined as a store, corporate facility or distribution center) for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable. events that result in a store asset impairment review include plans to close a store or facility or a significant decrease in the operating performance of a store. when such an indicator occurs, the company evaluates the store assets for impairment by comparing the undiscounted future cash flows expected to be generated by the store to its carrying amount. if the carrying amount exceeds the estimated undiscounted future cash flows, an analysis is performed to estimate the fair value of the asset. an impairment is recorded if the fair value of the store’s assets is less than the carrying amount.47the evaluation of store assets for possible indications of impairment and the determination of the fair value of a store requires managements to make significant estimates, complex judgments, and assumptions. these assumptions include revenue growth rates, product margins, operating expenses, current market rents that could be received as sublease income, and discount rate. given the company’s evaluation of impairment of store assets requires management to make significant assumptions, performing audit procedures to evaluate whether management appropriately identified events or changes in circumstances indicating that the carrying amounts of store assets may not be recoverable and determine store fair value required a high degree of auditor judgment. in addition, our audit effort included the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. the primary procedures we performed to address this critical audit matter included: •testing the effectiveness of controls relating to management’s identification of indicators of impairment, the assessment of the projected undiscounted cash flows to be generated by stores with indicators of impairment, the determination of the fair value of the stores and the measurement of any resulting impairment. •evaluating management’s store asset impairment analysis including inspecting the company’s analysis of historical results to determine if contrary evidence existed as to the completeness of the population of potentially impaired stores. •testing management’s process for determining the projected undiscounted cash flows to be generated by the stores. we evaluated the reasonableness of management’s assumptions used to forecast future cash flows including forecasted growth rate by comparing these forecasts to historical operating results of the company. •evaluating management’s assumptions used to estimate fair value of the stores by performing a sensitivity analysis to evaluate the changes in the fair value of the individual stores that would result from changes in the underlying assumptions. •utilizing a valuation specialist to assist in our evaluation of the current market rents and market participant real estate data and related assumptions used to estimate store fair value. /s/ moss adams llp seattle, washington march 15, 2021we have served as the company’s auditor since 2006.

critical audit matter the critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. assessment of impairment of long-lived assets as described in note 1 to the financial statements, the company identified indicators of possible impairment of its long-lived assets during the year ended december 31, 2020 and performed impairment testing by comparing the estimated undiscounted cash flows including from the eventual disposal of the long-lived assets to the carrying value of the asset group. we identified the determination of the asset group, the primary asset associated with the asset group, and the estimate of the cash flows from disposition of certain assets upon disposal of the asset group at the end of the remaining useful life of the primary asset as a critical audit matter. the principal considerations for our determination that this represents a critical audit matter is the judgment, complexity and subjectivity involved in management’s analysis. the analysis required estimation of the cash flows associated with the disposal of the asset group at the end of the useful life of the primary asset. this analysis involved the use of a specialist to assist with determining the cash flows from disposal of certain assets of the group. ‎ a. h. belo corporation 2020 annual report on form 10-kpage 28 table of contents our audit procedures related to the analysis included the following, among others: we obtained an understanding of and evaluated the design of controls over the company's process to evaluate long-lived assets for impairment, including controls over management's review of the significant considerations, including identification of the asset group and the primary asset and the cash flows from disposition of certain assets upon disposal of the asset group, as described above. we assessed the appropriateness of management’s identification of asset groups and the primary asset within the asset group. we recalculated the carrying value for the identified asset group. we assessed the reasonableness of the methodologies and significant inputs used to estimate the cash flows from disposal of certain assets of the group , which consisted of the identification of comparable market transactions and estimation of the cash flows from disposal of assets associated with land, buildings and improvements with the assistance of our valuation specialists, and we tested the completeness and accuracy of the underlying data used by the company in its analysis. /s/ grant thornton llp we have served as the company’s auditor since 2018.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.allowance for loan and lease losses - commercial and consumer card loans as described in notes 1 and 5 to the consolidated financial statements, the allowance for loan and lease losses represents management’s estimate of the expected credit losses in the corporation’s loan and lease portfolio, excluding loans and unfunded lending commitments accounted for under the fair bank of america 88value option. as of december 31, 2021, the allowance for loan and lease losses was $12.4 billion on total loans and leases of $971.3 billion, which excludes loans accounted for under the fair value option. for commercial and consumer card loans, the expected credit loss is typically estimated using quantitative methods that consider a variety of factors such as historical loss experience, the current credit quality of the portfolio as well as an economic outlook over the life of the loan. in its loss forecasting framework, the corporation incorporates forward looking information through the use of macroeconomic scenarios applied over the forecasted life of the assets. these macroeconomic scenarios include variables that have historically been key drivers of increases and decreases in credit losses. these variables include, but are not limited to, unemployment rates, real estate prices, gross domestic product levels and corporate bond spreads. the scenarios that are chosen and the weighting given to each scenario depend on a variety of factors including recent economic events, leading economic indicators, views of internal as well as third-party economists and industry trends. also included in the allowance for loan and lease losses are qualitative reserves to cover losses that are expected but, in the corporation's assessment, may not be adequately reflected in the quantitative methods or the economic assumptions. factors that the corporation considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans and nonaccrual loans, the effect of external factors such as competition, and legal and regulatory requirements, among others. further, the corporation considers the inherent uncertainty in quantitative models that are built on historical data.the principal considerations for our determination that performing procedures relating to the allowance for loan and lease losses for the commercial and consumer card portfolios is a critical audit matter are (i) the significant judgment and estimation by management in developing lifetime economic forecast scenarios, related weightings to each scenario and certain qualitative reserves, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence obtained, and (ii) the audit effort involved professionals with specialized skill and knowledge.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the allowance for loan and lease losses, including controls over the evaluation and approval of models, forecast scenarios and related weightings, and qualitative reserves. these procedures also included, among others, testing management’s process for estimating the allowance for loan and lease losses, including (i) evaluating the appropriateness of the loss forecast models and methodology, (ii) evaluating the reasonableness of certain macroeconomic variables, (iii) evaluating the reasonableness of management’s development, selection and weighting of lifetime economic forecast scenarios used in the loss forecast models, (iv) testing the completeness and accuracy of data used in the estimate, and (v) evaluating the reasonableness of certain qualitative reserves made to the model output results to determine the overall allowance for loan and lease losses. the procedures also included the involvement of professionals with specialized skill and knowledge to assist in evaluating the appropriateness of certain loss forecast models, the reasonableness of economic forecast scenarios and related weightings and the reasonableness of certain qualitative reserves. valuation of certain level 3 financial instruments as described in notes 1 and 20 to the consolidated financial statements, the corporation carries certain financial instruments at fair value, which includes $10.7 billion of assets and $6.9 billion of liabilities classified as level 3 fair value measurements that are valued on a recurring basis and $2.3 billion of assets classified as level 3 fair value measurements that are valued on a nonrecurring basis, for which the determination of fair value requires significant management judgment or estimation. the corporation determines the fair value of level 3 financial instruments using pricing models, discounted cash flow methodologies, or similar techniques that require inputs that are both unobservable and are significant to the overall fair value measurement. unobservable inputs, such as volatility or price, may be determined using quantitative-based extrapolations or other internal methodologies which incorporate management estimates and available market information. the principal considerations for our determination that performing procedures relating to the valuation of certain level 3 financial instruments is a critical audit matter are the significant judgment and estimation used by management to determine the fair value of these financial instruments, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence obtained, including the involvement of professionals with specialized skill and knowledge.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the valuation of financial instruments, including controls related to valuation models, significant unobservable inputs, and data. these procedures also included, among others, the involvement of professionals with specialized skill and knowledge to assist in developing an independent estimate of fair value for a sample of these certain financial instruments and comparison of management’s estimate to the independently developed estimate of fair value. developing the independent estimate involved testing the completeness and accuracy of data provided by management and evaluating the reasonableness of management’s significant unobservable inputs. charlotte, north carolina february 22, 2022we have served as the corporation’s auditor since 1958.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. revenue recognition – identifying and evaluating terms and conditions in contracts for the timing of revenue recognition. as described in note 3 to the consolidated financial statements, management applies the following steps in their determination of revenue to be recognized: 1) identification of the contract with a customer; 2) identification of the performance obligations in the contract; 3) determination of the transaction price; 4) allocation of the transaction price to the performance obligations in the contract; and 5) recognition of revenue when, or as, the company satisfies a performance obligation. since the control of the product is typically transferred to the customer depending on the terms of the contract, management applies judgment in identifying and evaluating any terms and conditions when the company has an enforceable right to payment. for the fiscal year ended june 26, 2020, the company’s revenue was $1,642.0 million. the principal considerations for our determination that performing procedures relating to revenue recognition, specifically the identification and evaluation of terms and conditions in contracts for the timing of revenue recognition, is a critical audit matter are that there was a significant amount of judgment exercised by management in identifying and evaluating terms and conditions in contracts that impact the timing of revenue recognition. this in turn led to a high degree of auditor judgment and an increased extent of audit effort in performing our audit procedures to evaluate whether terms and conditions in contracts and point of controls transferred were appropriately identified and evaluated by management. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of internal controls relating to the revenue recognition process, including controls related to the identification and evaluation of terms and conditions in contracts and the determination of the appropriate amount and timing of revenue recognition based on the contractual terms. these procedures also included, among others: (i) assessed the terms in the customer contract and evaluated the appropriateness of management’s application of their accounting policies and determination of revenue recognition; (ii) tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements; (iii) selected a sample of sales transaction from the period within a defined period before 63 table of contents and after the company’s fiscal year ended and obtained the invoice, customer contract, bill of lading and proof of delivery, in order to evaluate whether revenue was recognized in the appropriate fiscal year; and (iv) selected a sample of credit memos from the period immediately subsequent to the company’s fiscal year end and obtained the related invoice, and shipping documents to evaluate whether they relate to revenue recognition in the fiscal year ended. /s/ pricewaterhouse coopers abas ltd. bangkok, thailand august 18, 2020 we have served as the company’s auditor since 1999.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. impairment assessment over long-lived assets – refer to notes 2 and 3 to the financial statements critical audit matter description the company's long-lived assets were $63.2 million and related depreciation and amortization was $42.3 million as of december 31, 2020. the company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recovered. the company reviews both qualitative and quantitative aspects of the business during the analysis of impairment. during the first quarter of 2020, the combination of the covid-19 pandemic and actions taken by the opec+ countries caused oil and gas commodity demand to decrease significantly. the company determined that these were triggering events which could indicate impairment of its long-lived assets. during the quantitative review, the company reviewed the undiscounted future cash flows in its assessment of whether long-lived assets were impaired. the company determined that there was no impairment of its long-lived assets during the twelve months ended december 31, 2020. we identified the company's impairment assessment over long-lived assets as a critical audit matter. the principal considerations for our determination include the high degree of management subjectivity in determining significant assumptions included in the company’s undiscounted cash flows model, which include management’s estimates related to forecasted future growth rates and demand for services. performing audit procedures and evaluating audit evidence obtained related to these considerations required a high degree of auditor judgement and effort. how the critical audit matter was addressed in the audit our audit procedures performed to address this critical audit matter included the following, among others: ●we obtained an understanding of management’s process to develop their estimates included in the impairment assessment of long-lived assets. we also evaluated the design of key controls used by management to develop their estimates. ●we evaluated the reasonableness of the company’s undiscounted cash flow forecast used in the impairment assessment by performing inquiries with management, comparing prior period forecasts to actual results, and considering positive and negative evidence impacting management’s forecasts. we tested the mechanical accuracy of the amounts and formulas included in the company’s undiscounted cashflow assessment and agreed long-lived asset balances to the company’s consolidated general ledger. management’s assessment over going concern – refer to note 2 to the financial statements critical audit matter description the company’s financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realization of assets and settlement of liabilities in the normal course of business. for the twelve months ended december 31, 2020 and 2019, the company incurred net losses of $1.4 million and $7.7 million, respectively. as of december 31, 2020, the company had total current assets of $4.4 million, which slightly exceeded their total current liabilities by $24,000. as of december 31, 2019, the company had total current liabilities of $42.1 million, which exceeded their total current assets of $8.7 million by $33.4 million. due to the recent developments and improvements to their financial position as discussed in note 2 to the consolidated financial statements, including conversion of related party debt to equity, certain modifications and extension of maturity on the company’s east west bank revolving credit facility, and proceeds from the september 28, 2020 at-the-market offering, the company believes there is no substantial doubt over their ability to continue as a going concern from one year after the date of issuance of the audited consolidated financial statements, or march 23, 2021. we identified the company's assessment over going concern as a critical audit matter. the principal considerations for our determination include the high degree of management subjectivity in determining significant assumptions included in the company’s estimation of future cash flows, which include management’s estimates related to future operations. performing audit procedures and evaluating audit evidence obtained related to these considerations required a high degree of auditor judgement and effort. how the critical audit matter was addressed in the audit our audit procedures performed to address this critical audit matter included the following, among others: ●we obtained an understanding of management’s process to develop their estimates included in the future cash flows assessment. we also evaluated the design of key controls used by management to develop their estimates. ●we tested the reasonableness of the forecasted revenue, operating expenses, and uses and sources of cash flows in management’s assessment of whether the company has sufficient liquidity to fund operations for at least one year from the financial statement issuance date. this testing included inquiries with management, comparison of prior period forecasts to actual results, consideration of positive and negative evidence impacting management’s forecasts, the company’s financing arrangements in place as of the report date, market and industry factors. ●we reviewed subsequent events, compliance with terms of the debt agreement, read board of director meeting minutes, and performed inquiries with those charged with governance. ●we also evaluated the adequacy of the company’s disclosures in note 2 in relation to the going concern uncertainty matter. we have served as the company’s auditor since 2010.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 47 tradenames and other intangibles, net – trojan - refer to notes 1 and 7 to the consolidated financial statements critical audit matter description the company owns tradenames that are considered to have indefinite lives. these tradenames are required to be measured periodically for impairment. in recent years the company’s trojan business, specifically the condom category, has not grown and competition has increased resulting in a reduction in expected future cash flows. as a result, the trojan business has experienced sales and profit declines that has eroded a portion of the excess between the fair and carrying value, which could result in an impairment of the asset if such sales and profit declines continue. the carrying value of the trojan tradename is $176.4 million and fair value exceeded the carrying value by 70% as of december 31, 2021. management estimates the fair value of this tradename on a periodic basis. the determination of the fair value requires management to make significant estimates and assumptions related to future performance, such as revenue growth rates, as well as the selection of appropriate valuation assumptions such as the royalty rate and discount rate. changes in these assumptions could have a significant impact on the fair value of the tradename, leading to an impairment. given the significant judgments made by management to estimate the tradename’s fair value, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the revenue growth rates and the selection of the royalty rate and discount rate, involved a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.how the critical audit matter was addressed in the audit our audit procedures related to the revenue growth rates and selection of the royalty rate and discount rate for the tradename included the following, among others: •we tested the effectiveness of controls over the account balance, including those over the revenue growth rates and the selection of the royalty rate and discount rate. •we evaluated management’s ability to accurately forecast revenue growth by comparing actual performance to management’s historical forecasts. •we evaluated the reasonableness of management’s forecasted revenue growth by comparing the forecasts to: –historical performance. –internal communications to management and the board of directors. –forecasted information included in analyst and industry reports for the company and certain of its peer companies. •with the assistance of our fair value specialists, we evaluated the reasonableness of the royalty rate and discount rate by: -testing the source information underlying the determination of the royalty rate and discount rate and the mathematical accuracy of the calculation. -developing a range of independent estimates and comparing those to the royalty rate and discount rate selected by management. acquisition – thera breath tradename – refer to note 6 to the consolidated financial statements critical audit matter description the company acquired all of the outstanding equity of dr. harold katz, llc and hk-ip international, inc., the owner of the therabreath® brand and oral care products business (the “thera breath acquisition”). the company paid $556.0, net of cash acquired, and may make an additional cash payment up to $14.0 million related to certain indemnifications provided by the seller. the company accounted for the thera breath acquisition under the acquisition method of accounting for business combinations. accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including a tradename of $487.0 million. management estimated the fair value of the tradename using a discounted cash flow method. the fair value determination of the tradename required management to make significant estimates and assumptions related to future revenue, cash flows and the selection of a discount rate.given that the fair value determination of the tradename requires management to make significant estimates and assumptions related to the forecasts of future revenue and cash flows, and the selection of a discount rate, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.48 how the critical audit matter was addressed in the audit our audit procedures related to the forecasts of future revenue and cash flows for the valuation of the tradename, as well as the selection of the associated discount rate, included the following, among others: •we tested the effectiveness of controls over the valuation of the tradename, including management’s controls over forecasts of future revenue and cash flows and selection of a discount rate. •we assessed the reasonableness of management’s forecasts of future revenue and cash flows by comparing the projections to: –historical performance. –internal communications to management and the board of directors. –forecasted information included in analyst and industry reports for the company and certain of its peer companies. •with the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate by: –testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculation. –developing a range of independent estimates and comparing those to the discount rate selected by management. /s/ deloitte & touche llp parsippany, nj february 17, 2022 we have served as the company's auditor since 1968.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.new aqua— intangible assets — refer to notes 1, 3 and 6 to the financial statements critical audit matter description as described in note 1, 3, and 6 to the consolidated financial statements, the company completed multiple acquisitions for total cash consideration of $244.0 million in the year ended december 31, 2021. the company allocated the purchase price of its acquisitions to the assets acquired, liabilities assumed, and noncontrolling interests based upon their respective fair values at acquisition date utilizing management estimates and inputs from an independent third-party valuation firm to assist in determining these fair values. the purchase price allocation resulted in identifiable intangible asset of $131.9 million of which $93.7 million related to the customer relationships and trade names acquired in connection with the acquisition of new aqua, llc (“new aqua”). management estimated the fair value of the new aqua trade names using the relief of royalty method and the fair value of the new aqua customer relationships using the multi-period excess earnings discounted cash flow method. the fair value determination of these intangibles required management to make significant estimates and assumptions related to business and valuation assumptions, including revenue growth rates, profit margins, discount rates, attrition rates, and royalty rates.50we identified management’s estimate of the fair value of acquired new aqua trade names and customer relationships as a critical audit matter because of the significant judgments made by management to estimate the respective fair values. this required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s projected future cash flows and the selection of valuation assumptions.how the critical audit matter was addressed in the audit our audit procedures related to the business and valuation assumptions to estimate the fair value for these intangible assets included the following, among others: •we tested the effectiveness of controls over management’s determination of the fair values of acquired trade names and customer relationships, including those over the projected future cash flows and selection of revenue growth rates, profit margins, discount rates, attrition rates, and royalty rates.•we assessed the reasonableness of management’s selection of revenue growth rates and profit margins by comparing the projections to historical results, internal communications to management, and certain industry and market trends.•with the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methods and assumptions, including the discount rates, attrition rates, and royalty rates, by: •assessing the appropriateness of the valuation methodology used to determine the valuation assumptions. •testing the source information underlying the determination of the valuation assumptions and testing the mathematical accuracy of the calculations. •developing a range of independent estimates of the valuation assumptions and comparing the valuation assumptions selected by management to the range of independent estimates. /s/deloitte & touche llp deloitte & touche llp chicago, illinois february 25, 2022we have served as the company’s auditor since 1988.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. acquisition of venue next inc. - valuation of customer relationships and developed technology intangible assets as described in note 3 to the consolidated financial statements, on march 3, 2021, the company completed the acquisition of venue next inc. for total purchase consideration, net of cash acquired, of $66.9 million. other intangible assets acquired as part of the acquisition of $19.8 million consist of definite-lived intangible assets, with a significant portion related to customer relationships and developed technology. the fair values of these intangible assets were estimated by management under the income approach using either the relief-from-royalty method for developed technology or the multi-period excess earnings method for the customer relationships. management’s estimates of fair value are based upon assumptions related to projected revenues and earnings before interest expense, income taxes, depreciation, and amortization (“ebitda”) margins.the principal considerations for our determination that performing procedures relating to the valuation of the acquired customer relationships and developed technology intangible assets from the venue next inc. acquisition is a critical audit matter are (i) the significant judgment by management when determining the fair values of the customer relationships and developed technology intangible assets acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projected revenues and ebitda margins; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationships and developed technology intangible assets. these procedures also included, among others (i) reading the purchase agreement; (ii) testing management’s process for determining the fair values of the customer relationships and developed technology intangible assets acquired; (iii) evaluating the appropriateness of the relief-from-royalty method and the multi-period excess earnings method; (iv) testing the completeness and accuracy of the underlying data used in the relief-from-royalty method and the multi-period excess earnings method; and (v) evaluating the reasonableness of the significant assumptions used by management related to projected revenues and ebitda margins. evaluating management’s significant assumptions related to projected revenues and ebitda margins involved evaluating whether the significant assumptions used by management were reasonable considering (i) the current and past performance of venue next inc.; (ii) the consistency with external market and industry data; and (iii) whether these significant assumptions were consistent with evidence obtained in other areas of the audit. professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the relief-from-royalty method and the multi-period excess earnings method./s/ pricewaterhouse coopers llp philadelphia, pennsylvania march 1, 202281table of contents we have served as the company’s auditor since 2016.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.revenue recognition - estimated costs to complete system contracts as described in note 1 to the consolidated financial statements, $1.8 billion of the company’s total revenues for the year ended december 31, 2020 was generated from system contracts. the company recognizes revenue on a significant portion of system contracts on an over-time basis, electing an input method of estimated costs as a measure of performance completed. for contracts accounted for over-time using estimated costs as a measure of performance completed, the company relies on estimates of the total estimated costs to complete the contract (“estimated costs at completion”). total estimated costs at completion include direct labor, material and subcontracting costs. due to the nature of the efforts required to meet the underlying performance obligation, determining estimated costs at completion may be complex and subject to many variables. as disclosed by management, management reviews the progress and performance of open contracts in order to determine the best estimate of estimated costs at completion. as part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion, the project schedule, identified risks and opportunities, and the related changes in estimates of costs. the risks and opportunities include management’s judgments about the ability and the cost to achieve the project schedule, technical requirements, and other contract requirements. the principal considerations for our determination that performing procedures relating to the estimated costs at completion for system contracts is a critical audit matter are the significant judgments by management when developing the estimated costs at completion, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate management’s estimates related to management’s judgments about the cost to achieve the project schedule, technical requirements, and other contract requirements. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the determination of estimated costs at completion. these procedures also included, among others, evaluating and testing management’s process for determining the estimated costs at completion for a sample of contracts. management’s process for determining the estimated costs at completion was evaluated for reasonableness by (i) performing a comparison of the originally estimated and actual costs incurred on completed contracts; (ii) evaluating the timely identification of circumstances that may warrant a modification to estimated costs at completion; and (iii) analyzing contracts and project schedules that support those estimates./s/ pricewaterhouse coopers llp chicago, illinois february 12, 2021we have served as the company’s auditor since 2018.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. indefinite-lived intangible asset impairment assessment – silver sneakers tradename as described in notes 1 and 6 to the consolidated financial statements, the company’s silver sneakers tradename indefinite-lived intangible asset balance was $29.0 million as of december 31, 2021. management reviews indefinite-lived intangible assets for impairment during the fourth quarter of each year or more frequently whenever events or circumstances indicate that the carrying value of indefinite-lived intangible assets may not be recoverable. fair value of the silver sneakers indefinite-lived tradename was estimated by management using the relief-from-royalty method. estimating the fair value of the silver sneakers indefinite-lived tradename required the use of significant assumptions related to the long-term growth rates of future revenues associated with the tradename, the terminal growth rate of revenue, the royalty rate for such revenue, the tax rate, and the discount rate. the principal considerations for our determination that performing procedures relating to the indefinite-lived intangible asset impairment assessment of the silver sneakers tradename is a critical audit matter are (i) the significant judgment by management when developing the fair value of the silver sneakers tradename; (ii) significant auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumption related to the royalty rate for revenue associated with the silver sneakers tradename; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s indefinite-lived intangible asset impairment assessment, including controls over the development of the significant assumption related to the royalty rate for revenue associated with the silver sneakers tradename. these procedures also included, among others (i) testing management’s process for developing the fair value of the silver sneakers tradename; (ii) evaluating the appropriateness of the valuation method; (iii) testing the completeness, accuracy, and relevance of underlying data used in estimating the fair value of the silver sneakers tradename; and (iv) evaluating the reasonableness of the significant assumption used by management related to the royalty rate for revenue associated with the silver sneakers tradename. evaluating the reasonableness of management’s assumption related to the royalty rate for revenue associated with the silver sneakers tradename involved considering (i) the current and past financial performance and (ii) the consistency with external market and industry data. professionals with specialized skill and knowledge were used to 39assist in evaluating the appropriateness of the valuation method and evaluating the reasonableness of the significant assumption related to the royalty rate for revenue associated with the silver sneakers tradename. /s/ pricewaterhouse coopers llp nashville, tennessee february 25, 2022 we have served as the company’s auditor since 2014.

critical audit matters the critical audit matters communicatedbelow are matters arising from the current period audit of the financial statements that were communicated or required to be communicatedto the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involvedour especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way ouropinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separateopinions on the critical audit matters or on the accounts or disclosures to which they relate. f-1 table of contents evaluation of the accounting for and disclosure of digital currency held as disclosed in note 2 to the consolidatedfinancial statements, the company’s digital currency held as of september 30, 2021, which mainly consist of bitcoin, are accountedfor as indefinite-lived intangible assets, and have been included in current assets on the consolidated balance sheet. the company’sdigital currency as of september 30, 2021 amounted to approximately $23,603,000. we identified the accounting for and disclosure of thedigital currency held as a critical audit matter because, currently, no specific definitive guidance exists for the accounting for anddisclosure of digital currencies held in accordance with accounting principles generally accepted in the united states (“gaap”).the company’s management has exercised significant judgment in their determination of how existing gaap should be applied to theaccounting for its digital currency held, the associated financial statement presentation and accompanying footnote disclosures. the primary procedures we performed to addressthis critical audit matter included the following:·evaluated management’s rationale for the application of accounting standards codification (“asc”) 350 to account for its digital currency held and examined management’s processes fordetermining the amount of impairment expense recognized; ·evaluated management’s rationale for the inclusion of digital currencyas a current asset on the balance sheet; ·independently and directly confirmed the balance and ownership of digitalcurrency that is in the custody of a third party;·evaluated management’s disclosures of its digital currency activitiesin the financial statement footnotes; and ·examined supporting sale and cash receipt evidence for digital currencysales, including management’s processes for calculating any gains or losses on sales of its digital currency. evaluation of the accounting for and disclosure of digital currency mining revenue recognized as disclosed in note 2, the company recognizesrevenue in accordance with asc 606, revenue from contracts with customers. the company provides computing power to the mining pools andin exchange for providing such computing power, the company is entitled to a fractional share of the fixed cryptocurrency award the pooloperator receives for successfully adding a block to the blockchain, plus a fractional share of the transaction fees attached to thatblock. the company’s fractional share is based on the proportion of computing power the company contributed to the mining pool operatorto the total computing power contributed by all mining pool participants in solving the current algorithm. during the year ended september30, 2021, the company recognized net digital currency mining revenue of approximately $38,846,000. we identified the accounting for anddisclosure of digital currency mining revenue recognized as a critical audit matter because, currently, no specific definitive guidanceexists for the accounting for and disclosure of digital currency mining revenue recognized in accordance with gaap. the company’smanagement has exercised significant judgment in their determination of how existing gaap should be applied to the accounting for anddisclosure of digital currency mining revenue recognized. the primary procedures we performed to addressthis critical audit matter included the following:·performed a site visitation of the facility where the company’s mininghardware is located. the visitation included an observation of the physical and environmental controls and mining equipment inventoryobservation procedures; ·evaluated management’s rationale for the application of asc 606 toaccount for digital currency awards earned; ·evaluated management’s disclosures of its digital currency activitiesin the financial statement footnotes; ·evaluated and tested management’s rationale and supporting documentationassociated with the valuation of digital currency awards earned; ·independently confirmed certain financial data and wallet records directlywith the mining pools; ·compared the company’s wallet records of digital currency mining compensationreceived to publicly available blockchain records; and·undertook an analytical review of total digital currency mining revenueexpected to be recognized by the company by assessing the total hash power contributed onto the network by the company against total blockrewards and transaction fees issued over the year. /s/ malone bailey, ll pwww.malonebailey.com we have served as the company's auditorsince 2018.

critical audit matters thecritical audit matters communicated below are matters arising from the current period audit of the consolidated financial statementsthat were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures thatare material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical auditmatters or on the accounts or disclosures to which they relate. revenuefrom contracts with customers descriptionof matter the company had $124,532 in revenue for the year ended december 31, 2020. as disclosed in note 2 to the consolidated financial statements,the company management recognizes revenue upon the transfer of control of goods, in an amount that reflects the considerationthat is expected to be received in exchange for those goods. how we addressed the matter in our audits basedon our knowledge of the company, we determined the nature and extent of procedures to be performed over revenue. our audit proceduresincluded the following for each revenue stream where procedures were performed: ●obtained an understanding of the internal controls and processes in place over the company’s revenue recognition processes and adoption of asc 606.●assessed the recorded revenue by selecting a sample of transactions, analyzing the related contract, testing management’s identification of distinct performance obligations, and comparing the amounts recognized for consistency with underlying documentation. wehave served as the company’s auditors since 2019.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.valuation of local media reporting unit – refer to notes 1 and 10 to the financial statements critical audit matter description the company tests goodwill for impairment, including within the local media reporting unit (“local media”), on an annual basis with an impairment testing date during the fourth quarter of each year. within the company’s quantitative annual impairment testing, the fair value of local media is compared to its carrying value. the company uses both income and market approaches to determine the fair value of local media. the determination of fair value utilizes assumptions including future cash flows, discount rates, and long-term growth rates. as of december 31, 2020, local media’s goodwill balance was $905 million. f-22we identified the valuation of local media as a critical audit matter because of the significant estimates and assumptions management utilized in determining the fair value. these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s forecasts of future cash flows as well as the selection of the discount rates and long-term growth rates, including the need to involve our fair value specialists. how the critical audit matter was addressed in the audit our audit procedures related to the projected future cash flows as well as the selection of the discount rates and long-term growth rates for purposes of estimating the fair value of local media included the following, among others:•we inquired of management to understand the process being used by the company to determine the valuation of local media.•we tested the design and operating effectiveness of the company’s internal controls over the valuation of local media, including controls over forecasts of projected future cash flows as well as the selection of the discount rates and long-term growth rates. •we evaluated the reasonableness of management’s projected future cash flows by comparing the forecasts to:•historical cash flows.•underlying analysis detailing business strategies and growth plans including consideration of the effects related to the covid-19 pandemic.•internal communications to management and the board of directors.•forecasted information included in analyst and industry reports for the company and certain of its peer companies. •with the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodologies utilized along with valuation assumptions including the discount rates and long-term growth rates selected by:•testing the source information underlying the determination of the discount rates and long-term growth rates and testing the mathematical accuracy of the calculations.•developing a range of independent estimates for the discount rates and long-term growth rates and comparing those to those rates selected by management.valuation of 2019 acquired fcc licenses - refer to notes 1 and 10 to the financial statements critical audit matter description the company tests fcc licenses for impairment on at least an annual basis. within the company’s quantitative annual impairment testing, the fair value of each fcc license is compared to its carrying value. the company uses an income approach referred to as the “greenfield approach” to determine the fair value of each fcc license. the determination of fair value utilizes assumptions including future market revenues and cash flows for each individual fcc license, as well as discount rates. the assumptions can require significant auditor judgment, in addition to complexity, due to uncertainty of the economic impact of the covid-19 pandemic. as of december 31, 2020, recorded fcc licenses attributed to 2019 acquired fcc licenses were $193 million.we identified the valuation of the 2019 acquired fcc licenses as a critical audit matter because of the significant estimates and assumptions management utilized in determining their fair values along with the limited period of time in which they were able to increase in fair value since the date of acquisition. these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s forecasts of future market revenues and cash flows as well as the selection of discount rates, including the need to involve our fair value specialists.f-23how the critical audit matter was addressed in the audit our audit procedures related to forecast of future market revenues and cash flows as well as the selection of discount rates for purposes of estimating the fair value of the 2019 acquired fcc licenses included the following, among others:•we inquired of management to understand the process being used by the company to determine the valuation of the 2019 acquired fcc licenses.•we tested the design and operating effectiveness of the company’s internal controls over the valuation of the 2019 acquired fcc licenses, including controls over forecasts of future market revenues and cash flows as well as the selection of the discount rates. •we evaluated the reasonableness of management’s forecasts of future market revenues and cash flows by comparing the projections to historical results and available industry data and performing lookback procedures to assess management’s ability to forecast future market revenues and cash flows.•with the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodologies utilized along with valuation assumptions including the discount rates selected by:•testing the source information underlying the determination of the discount rates and testing the mathematical accuracy of the calculations.•developing a range of independent estimates for the discount rates and comparing those to the discount rates selected by management./s/ deloitte & touche llp cincinnati, ohio february 26, 2021we have served as the company’s auditor since at least 1959;

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.policyholders’ account balances – valuation of embedded derivative liabilities for equity-indexed contracts — refer to notes 7 and 9 to the financial statements critical audit matter description the company sells equity-indexed universal life and equity-indexed deferred annuity contracts with guaranteed minimum benefits, some of which contain embedded derivatives that are required to be bifurcated from a host reserve, separately accounted for, and measured at fair value. the embedded derivative represents future benefit cash flows in excess of the minimum guarantee cash flows. as of december 31, 2020, the fair value of the embedded derivative liabilities was $705 million. management utilizes various assumptions in order to measure the fair value of the embedded derivatives including assumptions related to lapse rate and equity volatility. these assumptions are evaluated annually by management with any changes in the estimated fair value resulting in a cumulative charge or credit to income from operations.given the valuation of the embedded derivative liabilities is sensitive to changes in these assumptions, the related audit effort in evaluating management’s selection of the assumptions related to the lapse rate and equity volatility required a high degree of auditor judgment and an increased extent of effort, including involvement of our actuarial and fair value specialists.how the critical audit matter was addressed in the audit our principal audit procedures related to the lapse rate and equity volatility assumptions selected by management for the valuation of embedded derivative liabilities included the following, among others:•we tested the effectiveness of management’s controls over the valuation of embedded derivative liabilities, including those over the development, selection, and implementation of the assumptions related to lapse rate and equity volatility.•with the assistance of our fair value specialists, we tested the completeness and accuracy of the underlying data used to determine the equity volatility assumptions.•we tested the completeness and accuracy of the historical company experience used to determine the lapse rate assumptions.•with the assistance of our actuarial specialists, we evaluated the appropriateness of the assumptions, evaluated the consistency of the selected assumptions used in the company’s valuation model, and tested the mathematical accuracy of the valuation model.policy and contract claims – property and casualty liability for unpaid claims and claim adjustment expenses — refer to notes 2 and 12 to the financial statements critical audit matter description the company establishes a liability for unpaid claims and claim adjustment expenses to provide for the estimated costs of paying claims under property and casualty insurance policies written by the company. the property and casualty liability for unpaid claims is included within policy and contract claims in the statements of financial position, which had a balance of $1.6 billion as of december 31, 2020. this liability, which includes estimates for both claims that have been reported and claims that have been incurred but not reported, represents the estimate of all claim and claim adjustment expenses associated with processing and settling the claims. the liability for unpaid claims is estimated using actuarial assumptions for loss development patterns that are based upon the company’s historical experience and consider the effects of current developments, anticipated trends and risk management programs.67table of contents given the subjectivity of estimating the ultimate cost to settle the liability for property and casualty insurance reported and incurred but not reported claims, the related audit effort in evaluating the assumptions for loss development patterns required a high degree of auditor judgment and an increased extent of effort, including involvement of our actuarial specialists.how the critical audit matter was addressed in the audit our principal audit procedures related to the assumptions for loss development patterns selected by management to estimate the property and casualty liability for unpaid claims and claim adjustment expenses included the following, among others:•we tested the effectiveness of management’s controls over the property and casualty liability for unpaid claims and claim adjustment expenses, including those over the development, selection, and implementation of the assumptions for loss development patterns used in the actuarial estimates.•with the assistance of our actuarial specialists, we tested the completeness and accuracy of the underlying data, including historical claims, used to determine the assumptions for loss development patterns, evaluated the appropriateness of the assumptions, evaluated the consistency of the selected assumptions used in the company’s valuation model, and tested the mathematical accuracy of the valuation model.•we evaluated the reasonableness of the company’s estimated property and casualty liability for unpaid losses and loss adjustment expenses by comparing to those independently derived by our actuarial specialists.mortgage loans on real estate – allowance for credit losses — refer to notes 2, 3, and 5 to the financial statements critical audit matter description the company measures credit losses for instruments measured at amortized cost, including its portfolio of commercial mortgage loans. the allowance for credit losses for mortgage loans, which was recorded on a net basis within mortgage loans on real estate in the statements of financial position, had a balance of $126 million as of december 31, 2020. the value of the allowance for credit losses on mortgage loans is estimated by management using the current expected credit loss model, which considers quantitative and qualitative allowance factors based on past loss experience, current economic conditions, and reasonable and supportable forecasts of future conditions. the qualitative allowance factors are developed quarterly based on the pooling of assets with similar risk characteristics and historical loss experience adjusted for the expected trend in the current market environment.given the subjectivity of estimating the qualitative allowance factors applied in developing the allowance for credit losses, performing audit procedures to evaluate whether the allowance for credit losses on mortgage loans was appropriately valued required a high degree of auditor judgment and an increased extent of effort, including involvement of our credit specialists.how the critical audit matter was addressed in the audit our principal audit procedures related to the assumptions surrounding qualitative allowance factors used by management to estimate the allowance for credit losses on mortgage loans included the following, among others:•we tested the effectiveness of management’s controls over the allowance for credit losses on mortgage loans, including those over the development, selection, and implementation of the assumptions related to the qualitative allowance factors.•with the assistance of our credit specialists, we evaluated the appropriateness of the model methodology, which includes the application of the qualitative allowance factors. we also evaluated the appropriateness of these assumptions and the consistency of the selected assumptions used in the company’s valuation model.•we evaluated management’s qualitative allowance factors by comparing them to current market data to identify potential bias in the determination of the allowance for credit losses on mortgage loans./s/ deloitte & touche llp houston, texas march 4, 2021we have served as the company's auditor since 2020.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.customer discount accruals in the u.s. - medicaid, managed care and medicare part d rebates as described in note 2 to the consolidated financial statements, the company records certain variable consideration including discounts, which are estimated at the time of sale generally using the expected value method. amounts accrued for aggregate customer discounts as of december 31, 2020 in the u.s. are $3.1 billion and are evaluated on a quarterly basis through comparison of information provided by the wholesalers, health maintenance organizations, pharmacy benefit managers, federal and state agencies, and other customers to the amounts accrued. certain of these discounts take the form of rebates, which are amounts owed based upon definitive contractual agreements or legal requirements with private sector (managed care) and public sector (medicaid and medicare part d) benefit providers, after the final dispensing of the product by a pharmacy to a benefit plan participant. the provision for rebates is based on expected patient usage, as well as inventory levels in the distribution channel to determine the contractual obligation to the benefit providers. management uses historical customer segment utilization mix, sales forecasts, changes to product mix and price, inventory levels in the distribution channel, government pricing calculations and prior payment history in order to estimate the expected provision. the principal considerations for our determination that performing procedures relating to customer discount accruals in the u.s. - medicaid, managed care, and medicare part d rebates is a critical audit matter are the significant judgment by management due to the significant measurement uncertainty involved in developing the provisions, as the provisions include assumptions related to changes to price and historical customer segment utilization mix, pertaining to forecasted customer claims that may not be fully paid until a subsequent period. this in turn led to a high degree of auditor judgment, subjectivity and effort in applying the procedures related to those assumptions and in evaluating the evidence obtained from these procedures. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to customer discount accruals in the u.s. - medicaid, managed care, and medicare part d rebates, including management’s controls over the assumptions used to estimate the corresponding rebate accruals. these procedures also included, among others, (i) developing an independent estimate of the rebate accruals by utilizing third party data on historical customer segment utilization mix in the u.s., changes to price, the terms of the specific rebate programs, and the historical trend of actual rebate claims paid, (ii) comparing the independent estimate to the rebate accruals recorded by management and (iii) testing actual rebate claims paid, including evaluating those claims for consistency with the contractual terms of the company’s rebate agreements. pricewaterhouse coopers llp florham park, new jersey february 25, 2021we have served as the company’s auditor since 2002.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.rebate accruals - medicaid drug rebate program as described in note 2 and note 10 to the consolidated financial statements, the company’s revenue from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with the company’s customers, health care providers or payers. the company records accruals for rebates to u.s. states under the medicaid drug rebate program as a reduction of sales when the product is shipped into the distribution channel using the expected value method. as of december 31, 2021, total accrued sales discounts, allowances and reserves were $237.2 million, of which a significant amount related to medicaid rebates. the company rebates individual u.s. states for all eligible units purchased under the medicaid program based on a rebate per unit calculation, which is based on the company’s average manufacturer prices. the company estimates expected unit sales to individuals covered by medicaid and rebates per unit under the medicaid program and adjust its rebate accrual based on actual unit sales and rebates per unit and changes in trends in medicaid utilization. the principal considerations for our determination that performing procedures relating to rebate accruals for the medicaid drug rebate program is a critical audit matter are (i) the significant judgment by management due to significant measurement uncertainty involved in developing the reserves, as the reserves are based on assumptions developed using historical experience, current contractual requirements, specific known market events and payment patterns and (ii) a high degree of auditor judgment, effort, and subjectivity in applying procedures related to these assumptions. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to rebate accruals for the medicaid drug rebate program, including controls over the assumptions used to estimate the rebate accruals. these procedures also included, among others, (i) developing an independent estimate of the rebate accruals by utilizing third-party data related to product sales, the historical trend of actual rebate claims paid and consideration of contractual requirement changes and market events; (ii) comparing the independent estimate to management’s estimate; and (iii) testing rebate claims processed by the company. /s/ pricewaterhouse coopers llp boston, massachusetts february 16, 2022we have served as the company’s auditor since 2007.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.44income taxes – realizability of deferred tax assets description of the matter as described in note 10 to the consolidated financial statements, as of december 31, 2020, the company had deferred tax assets before valuation allowance of $166.8 million. as of december 31, 2020, the company recorded a valuation allowance of $125.3 million for its deferred tax assets. the company records a valuation allowance based on management’s assessment of the realizability of the company’s deferred tax assets. in assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized, considering the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. auditing management's assessment of the realizability of deferred tax assets was complex and highly judgmental because of the subjectivity involved in projecting future taxable income and the complexities involved in considering relevant tax laws and regulations. in addition, the weighting of available positive and negative evidence relevant to the assessment involved significant judgment.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s process to assess the realizability of its deferred tax assets. our procedures included testing management’s controls over the consideration of various tax laws and regulations and the weighting of available positive and negative evidence.among other procedures performed, we tested the company’s projections of future taxable income supporting the realizability of deferred tax assets. we tested the company’s forecasts by comparing them to historical results and current industry, market and economic trends. we involved our tax professionals in evaluating relevant tax laws and regulations affecting the company’s assessment and testing the other sources of taxable income that were considered. we also assessed the weighting of available positive and negative evidence by management in evaluating whether it was more likely than not that some portion or all of the deferred tax assets will not be realized. in addition, we tested the completeness and accuracy of the underlying data that was used in the company’s assessment. goodwill impairment assessment for the industrial reporting unit description of the matter as discussed in note 9 to the consolidated financial statements, the industrial reporting unit goodwill balance was $101.4 million as of december 31, 2020. management performs an impairment assessment at the reporting unit level on an annual basis as of the company’s october month end or more frequently if circumstances warrant. as a result of an interim impairment assessment in march 2020, the company recorded a $116.2 million goodwill impairment loss for the industrial reporting unit. in its interim and annual goodwill impairment assessment, the company measured the fair value of the industrial reporting unit using an income approach based on the present value of future cash flows. the fair value was compared to the carrying value of the reporting unit as of the dates of each assessment. auditing management’s goodwill impairment analyses for the industrial reporting unit was complex and judgmental due to the significant estimation required in determining the fair value of the reporting unit. in particular, the fair value estimates were sensitive to significant assumptions such as revenue growth rates and discount rates, which are affected by expectations about business, market and overall economic conditions.45how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s process to complete its goodwill impairment assessment. our procedures included testing management’s controls over the review of each reporting unit’s valuation model, including review of the significant assumptions discussed above. to test the estimated fair value of the company’s industrial reporting unit, with the support of our valuation specialists, we performed audit procedures that included, among others, assessing the valuation methodology used by the company and testing the significant assumptions and the completeness and accuracy of underlying data used by management in its analyses. we compared the revenue growth rates to management’s internal projections and historical results, current and forecasted industry and economic trends, analyst reports, and forecasted peer company information. we also evaluated the selection of the discount rates by developing a range of independent estimates and comparing those to the rates selected by management. in addition, we assessed the historical accuracy of management’s estimates and performed sensitivity analyses over the significant assumptions to evaluate the changes in the fair value of the reporting unit that would result from changes in the assumptions./s/ ernst & young llp we have served as the company’s auditor since 2020.

critical audit matter the critical audit mattercommunicated below is a matter arising from the current-period audit of the financial statements that was communicated or required tobe communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and(2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alterin any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. f-2 revenue recognition — identificationof contractual terms in certain customer arrangements as described in note2 to the consolidated financial statements, management applies fasb topic 606, revenue from contacts with customers (“asc606”) to recognize revenue. management recognizes revenue upon transfer of control of promised goods or services to customers inan amount that reflects the consideration the company expects to receive in exchange for those goods or services. the company’srevenue is divided into two sources, with one source being from project construction which is recognized over time using the percentage-of-completionmethod under the cost approach. management is required to estimate the percentage of completion when determining the amount and timingof revenue recognition. the principal considerationsfor our determination that performing procedures over the percentage-of-completion method of recognition of revenue contracts and subsequentpayment collections is a critical audit matter as there are more significant risks associated with the percentage-of completion recognitionof this revenue. this in turn led to significant effort in performing our audit procedures which were designed to evaluate whether thecontractual terms, the timing of revenue recognition were appropriately identified and determined by management and to evaluate the reasonablenessof management’s estimates. our audit procedures included, among others, understandingof controls relating to management’s revenue recognition process, examining transaction related documents, confirming revenues andoutstanding receivables at the balance sheet date with a sample of the project construction customers, and testing collections subsequentto the balance sheet date. /s/ bf borgers cpa pcbf borgers cpa pc we have served as the company’s auditorsince 2017

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.46 evaluation of slow-moving and obsolete inventories at net realizable value as discussed in note 1 to the consolidated financial statements, the company monitors inventory levels in order to identify slow-moving or obsolete merchandise as these factors can indicate a decline in the market value of the inventory on hand. inventory cost is reduced to net realizable value when cost exceeds the market value less the cost of disposal. the market value is subject to the effects of consumer demands, customer preferences, and the broader economy. the company’s inventory balance was $324.0 million as of february 1, 2020, which represents 17% of total assets. we identified the evaluation of slow-moving and obsolete inventories at net realizable value as a critical audit matter because a high degree of auditor judgment was required to evaluate the company’s ability to sell certain products. the primary procedures we performed to address this critical audit matter included the following. we tested certain internal controls over the company’s inventory process, including controls related to the review of historical product sales and inventory quantities on-hand, the estimate of net realizable value of slow-moving and obsolete inventories and adjustments of inventory cost to net realizable value. we obtained an understanding of the costing method selected by the company. we evaluated the company’s methodology for determining slow-moving and obsolete merchandise. we selected certain products determined to be slow-moving or obsolete and considered current market trends or seasonal impacts by obtaining an understanding of the nature of the slow-moving and obsolete merchandise. we assessed the company’s inventory adjustments to net realizable value by performing a retrospective review of prior year inventory adjustments and analyzing sales for identified slow-moving and obsolete inventories subsequent to the measurement date. assessment of the adoption of accounting standards codification topic 842, leases as discussed in notes 1 and 3 to the consolidated financial statements, the company adopted asc topic 842 on february 3, 2019. the company adopted the standard on a modified retrospective basis and elected the package of practical expedients. as part of the adoption $628.9 million of right-of-use assets and $709.9 million of lease liabilities related to operating leases were recognized on the consolidated balance sheet as of the company’s adoption date.we identified the assessment of the adoption of asc topic 842 as a critical audit matter. a high degree of subjective auditor judgment and audit effort was required in evaluating the company’s adoption of asc topic 842. such auditor judgment and effort included assessing the incremental borrowing rates used to discount the unpaid lease payments to present value and changes to internal controls and business processes. in addition, the audit effort required the use of valuation professionals with specialized skills and knowledge to assist in performing the audit procedures and evaluating the audit evidence obtained over the incremental borrowing rates determined by the company. the primary procedures we performed to address this critical audit matter included the following. we gained an understanding over the company’s change in business process and tested certain internal controls over the company’s asc topic 842 implementation process, including controls related to the determination of the incremental borrowing rates. we gained an understanding of the company’s asc topic 842 accounting analyses that documented the facts and circumstances in its lease contracts, as well as its selection of available practical expedients. we evaluated these analyses by selecting a sample of lease contracts and comparing the relevant contract terms to those used by the company in its determination of the right-of-use assets and lease liabilities. we evaluated the company’s methodology for determining the incremental borrowing rates. in addition, we involved valuation professionals with specialized skills and knowledge who assessed the company’s incremental borrowing rates by performing an independent analysis using publicly available market data. we compared our analysis to the analysis performed by the company./s/ kpmg llp we have served as the company's auditor since 2002.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. transfers of financial assets as described further in notes 2, 7, and 8 to the financial statements, the company recognized gains on loan sales of approximately $718 million during the year ended december 31, 2021. the company is party to various transfer agreements pursuant to which it sells finance receivables meeting specified underwriting criteria with certain financing partners. the company also transfers its finance receivables in connection with asset backed securitization transactions. the company determines the accounting for the transfers of its finance receivables under asc 860, transfers and servicing of financial assets (“asc 860”).we determined the transfers of financial assets is a critical audit matter primarily because the related accounting guidance for transfers of finance receivables involves material transactions, complex judgments in determining the appropriateness of derecognition of the assets and obtaining legal opinions regarding isolation of the transferred finance receivables from the transferor.72our audit procedures related to the transfers of finance receivables and related gain on loan sales included the following, among others:•we tested the appropriateness of management’s accounting conclusions on the transfers of finance receivables by reading the various transfer or sale agreements and legal opinions, provided by the company’s external legal counsel, and compared the terms and conclusions to the criteria set forth in asc 860;•we tested the design and operating effectiveness of key controls relating to the transfers of finance receivables and related gains on loan sales, and the accounting conclusions reached thereon./s/ grant thornton llp we have served as the company’s auditor since 2015.

critical audit matter the critical audit matter communicated below is a matter arising from the current year audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee of the company’s board of directors and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. revenue – ship and debit reserve as described in note 1, the company records reserves related to estimated customer incentives, such as “ship and debit”, which arise when the company, from time to time based on market conditions, issue credits to certain distributors upon their shipments to their end customers. the ship and debit reserve comprehends both claims in process and anticipated claims arising from the eventual sale of distribution inventory that is subject to claim activity. the company performs a look-back analysis of revenues and credits issued to distributors. using their look-back analysis, the company adjusts their assumptions and estimated reserves each quarter. the resulting ship and debit reserve is recorded as a reduction to net sales with a corresponding reduction to accounts receivable, and approximated $40.0 million as of december 31, 2019. we identified the ship and debit reserve as a critical audit matter. estimating the reserve involves the application of models using assumptions including historical customer ship and debit credit rates and credit lag times on such revenues. these assumptions could be affected by current and future economic and market conditions. the primary procedures we performed to address this critical audit matter included: •obtaining an understanding, evaluating the design and testing the operating effectiveness of internal controls over the measurement of the ship and debit reserve, including testing controls over management’s review of the reserve calculation and the underlying assumptions used to develop the estimate. •testing select distributor balances. •vouching revenues and ship and debit credits to supporting documents. •evaluating the reasonableness of management’s assumptions by comparing the significant assumptions used to historical customer trends and current industry and market trends, including testing the completeness and accuracy of the underlying data. •performing sensitivity analyses on the significant assumptions to evaluate the potential changes in the ship and debit reserve that would result from changes in the assumptions. /s/ moss adams llp los angeles, california february 11, 2020 we have served as the company’s auditor since 1993.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.accounts receivable and net revenues fee-for-service arrangements— refer to note 1 to the financial statements critical audit matter description management reports accounts receivable and net revenues from fee-for service arrangements at the amounts estimated to be received under reimbursement arrangements with third-party payors, including private insurers, prepaid health plans, medicare, medicaid, and patients. due to the nature of the industry and the reimbursement environment in which the company operates, certain estimates are required to record total net revenues under fee-f-2table of contentsfor-service arrangements of $918 million for the year ended december 31, 2021, and accounts receivable at their net realizable value of $82 million as of december 31, 2021.accounts receivable and net fee-for-service revenues are based on contractually agreed-upon rates for services provided, reduced by estimated adjustments, including variable consideration for implicit price concessions for sales revenue. these estimates are determined utilizing historical realization data under a portfolio approach which is then assessed by management to evaluate whether adjustments should be made based on accounts receivable aging trends, other operating trends, and relevant business conditions such as governmental and managed care payor claims processing procedures.given the inherent subjectivity necessary to determine the estimated adjustments to net fee-for service revenues and the net realizable value of accounts receivable, auditing such estimates required a high degree of auditor judgement.how the critical audit matter was addressed in the audit our audit procedures related to management’s estimated adjustments to determine the net realizable value of accounts receivable and net fee-for-service revenues included the following, among others:we tested management’s analysis used to estimate the value of accounts receivable and amounts to be received under fee-for-service revenue contracts by:●obtaining an understanding of the factors considered and the assumptions made by management in determining the estimated adjustments,●testing the underlying data utilized by management to estimate the adjustments,●evaluating whether the adjustments to management’s estimate were reasonable by comparing the historical realization data to the accounts receivable aging and payor mix trends, as well as evaluating economic and industry conditions,●assessing whether the adjustments to management’s estimate were reasonable by utilizing prior year reserves and adjustments to revenue amounts originally recorded to develop a current year expectation,●performing an analysis of revenue adjustments processed for individual transactions and evaluating whether the nature and trends identified in such transactions were considered in management’s estimated adjustments,●comparing management’s prior-year recorded estimate to actual amounts recorded during the current year, and reviewing trends in management’s estimate over time. /s/ deloitte & touche llp costa, mesa, california march 1, 2022we have served as the company's auditor since 1998.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. revenue — refer to notes 2 and 5 to the financial statements critical audit matter description the company’s revenue is primarily derived from the provision of marketing and communications services which includes strategy, creative and production for advertising campaigns, public relations services including strategy, editorial, crisis support or issues management, media training, influencer engagement and events management, media buying and planning, experiential marketing and application/website design and development. each of the company’s operating companies (referred to as brands) generate revenue from one or more of these services. the brands have numerous customers and contracts, under a variety of contract terms and provisions. the volume of such contracts and the diversity of the terms in such contracts introduces significant complexity in assessing the accounting under the revenue accounting standard. this complexity includes the critical judgements around defining performance obligations and the recognition of revenue when or as the customer obtains control of the promised services in an amount that reflects the consideration expected to be received in exchange for those services.given the volume and diversity of the company’s contracts, performing audit procedures to evaluate whether revenue was appropriately recorded, required a high degree of auditor judgement and an increased extent of audit effort and is therefore considered a critical audit matter.how the critical audit matter was addressed in the audit59table of contents our audit procedures related to the testing of the company’s application of revenue accounting standard to their revenue contracts included the following, among others:•assessed the nature and amount of revenue recorded by brand and evaluated the overall application of the revenue accounting standard, •selected a sample of contracts, specifically including individually material revenue contracts, across the brands and types of contracts. testing included consideration of the specific application of the revenue accounting standard, including the identification of the performance obligation(s), the evaluation of the methods applied in the recognition and measurement of revenue, and the verification of the timing of delivery, transaction price and performance of services related to the revenue recorded.•tested the mathematical accuracy of revenue recorded for each selection based on audit evidence obtained.intangible assets – acquisitions and dispositions — refer to notes 2 and 4 to the financial statements critical audit matter description stagwell inc. was formed on august 2, 2021 as the result of a merger between stagwell marketing group, llc (a private company, “legacy smg”) and mdc partners, inc. (an existing public operating company listed on the nasdaq, “legacy mdc”). upon consummation of the merger (“transaction”), stagwell has become the issuer through a reverse merger by taking control of mdc, and was renamed stagwell inc. the acquisition consideration totaled $426 million.the acquisition was accounted for in accordance with financial accounting standards board (“fasb”) accounting standards codification (“asc”) topic 805, business combinations. accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including customer relationship assets of $713 million and tradenames of $98 million.the fair value determination of the acquired customer relationship and tradename intangible assets required management to make significant estimates and assumptions related to the forecasts of future cash flows and the selection of the customer attrition rates, discount rates, and royalty rates. performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.how the critical audit matter was addressed in the audit our audit procedures related to the forecasts of future cash flows and the selection of the customer attrition rates, discount rates, and royalty rates for the customer relationships and tradename intangible assets acquired included the following, among others:•we evaluated the sensitivity of changes in the assumptions on the fair value of the customer relationship and tradename intangible assets.•we assessed the reasonableness of management’s forecasts of future cash flows by comparing the projections to historical results and industry market data.•we evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.•with the assistance of our fair value specialists, we evaluated the reasonableness of the (1) customer attrition rates, (2) discount rates, and (3) royalty rates by:◦we assessed the reasonableness of management’s selection of customer attrition rates by comparing the revenue lost from customer attrition to historical data.◦testing the source information underlying the determination of the customer attrition rates, discount rates, and royalty rates, and testing the mathematical accuracy of the calculations.◦developing a range of independent estimates and comparing those to the discount rates and royalty rates selected by management./s/ deloitte & touche llp new york, ny march 17, 2022we have served as the company’s auditor since 2020.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.goodwill and indefinite-lived intangible asset impairment assessments for reporting units and brands of certain product groups as described in notes 1, 6, and 7 to the consolidated financial statements, the company’s consolidated goodwill and indefinite-lived intangible asset balances were $575.2 million and $2,265.3 million, respectively, as of march 31, 2020. goodwill is classified as the excess of the purchase price over the fair market value of assets acquired and liabilities assumed in business combinations. intangible assets generally represent our tradenames, brand names, and patents. goodwill and indefinite-lived intangible assets are not amortized, although the carrying values are tested for impairment at least annually in the fourth fiscal quarter of each year, or more frequently if events or changes in circumstances indicate that the asset may be impaired. goodwill is tested for impairment at the reporting unit level, which is one level below the operating segment level, and indefinite-lived intangible assets are tested at the asset level. an impairment loss is recognized if the carrying amount of the reporting unit or asset exceeds its fair value. management utilized the discounted cash flow methods to estimate the fair value of its reporting units and the excess earnings method to estimate the fair value of individual indefinite-lived intangible assets. as disclosed by management, key assumptions in developing the fair value measurement of the reporting units and indefinite-lived intangible assets include future cash flows and margins, both of which could be impacted by competition, changing consumer preferences, technological advances or changes in advertising and promotional expenses, and the discount rate. the principal considerations for our determination that performing procedures relating to goodwill and indefinite-lived intangible asset impairment assessments for reporting units and brands of certain product groups is a critical audit matter are there was significant judgment and estimation by management when developing the fair value measurements. this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating audit evidence relating to management’s cash flow projections and significant assumptions, including future cash flows, margins, and the discount rate. in addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s impairment assessments of goodwill and indefinite-lived intangible assets, including controls over the valuation of the company’s reporting units and individual indefinite-lived intangible assets. these procedures also included, among others, testing management’s process for developing the fair value measurements of the reporting units and indefinite-lived intangible assets for certain product groups. this included evaluating the appropriateness of methods used in developing the fair value measurements, testing the completeness, accuracy, and relevance of underlying data used, and evaluating the reasonableness of significant assumptions used by management, including future cash flows, margins, and the discount rate. evaluating the reasonableness of management’s assumptions related to future cash flows and margins involved evaluating whether the assumptions used by management were reasonable considering (i) current and historical performance, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the company’s fair value methods and reasonableness of certain significant assumptions used by management, including the discount rate.48/s/ pricewaterhouse coopers llp stamford, connecticut may 8, 2020we have served as the company’s auditor since at least 1999.

critical audit matter the critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. net realizable value of inventory as described further in note 1 to the financial statements, management measures the net realizable value of inventory based on estimated reductions to inventory for obsolete, slow-moving, excess and non-salable inventory by reviewing current transactions and forecasted demand. we identified the net realizable value of inventory specifically as a critical audit matter. the principal considerations for our determination that the net realizable value of inventory represents a critical audit matter are that the assessment of the valuation of inventory is complex and includes an estimate of forecasted demand. the demand estimate is subjective and requires the company to consider significant assumptions such as economic conditions, technological advances, historical usage, and consumer trends, which are subject to significant uncertainty and therefore require significant auditor judgement. 28table of contents our audit procedures related to the net realizable value of inventory included the following, among others: ·obtained management’s analysis of parts in inventory and expected customer demand, recalculated inputs into the analysis. this included, among other inputs, historical usage compared to quantities on hand, age, and general ledger balances. ·tested selected inventory items by making inquiries of management and evaluating the appropriateness of judgments, assumptions and documentation supporting adjustments to the reserve estimate. ·inquired with management and various staff members outside of the finance team to obtain support for selected forecast demand inputs as well as product specific trends grant thornton llp we have served as the company’s auditor since 2001.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. asset-based fee revenue - advisory programs fees as described in notes 1 and 3 to the consolidated financial statements, $7.421 billion of the firm's total asset-based fee revenue of $9.737 billion for the year ended december 31, 2021 was generated from program fees for investment advisory services provided within the partnership’s advisory programs. revenue from advisory programs fees are derived from fees determined by the underlying value of client assets. advisory program contracts outline the investment advisory services to be performed for a client under the contract and do not have a definite end date. program fees are based on the average daily market value of client assets in the program as well as contractual rates and are charged to clients monthly and collected the following month. the principal considerations for our determination that performing procedures relating to revenue from advisory program fees is a critical audit matter are the significant audit effort in performing procedures relating to the fees, which are calculated based on the valuation of client assets and the corresponding contractual rate charged to the client. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the recognition of revenue from advisory program fees. these procedures also included, for a sample of accounts, obtaining advisory program contracts and evaluating whether rates used in the calculations were consistent with the advisory program contracts, independently pricing the securities positions within the account, independently calculating the average assets under management, and independently calculating the advisory program fees./s/ pricewaterhouse coopers, llp st. louis, missouri march 11, 2022we have served as the partnership’s auditor since 2002.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.landfill accounting as described in note 3 of the consolidated financial statements, the company accounts for both landfill development assets, including the associated amortization expense, as well as capping, closure and post-closure costs related to its landfills. as of december 31, 2019, the company’s landfill development assets total $120.2 million, and the associated amortization expense for 2019 was $27.5 million. as of december 31, 2019, the company estimated its accrued capping, closure and post-closure costs at $71.9 million. the landfill development asset amortization and accrued capping, closure and post-closure costs are based on cash flow analyses, which require significant assumptions and estimates about the future operations and retirement of each landfill. significant judgments made by management in the cash flow analyses include the determination of the appropriate discount and inflation rates, and the amount and timing of expected future cash flows. management estimates the timing of expected future cash flows used in the analyses based on various assumptions at each individual landfill including: •remaining permitted capacity, which is estimated by company engineers, in consultation with third-party engineers and surveyors, who utilize annual aerial surveys. •the estimation and inclusion of unpermitted expansion airspace.•compaction factors, or airspace utilization factors (auf), are estimated using a process that considers the measured density obtained from annual surveys. we identified the company’s landfill development asset amortization expense and accrued capping, closure and post-closure costs as a critical audit matter because of the significant assumptions and judgments made by management. auditing management’s assumptions and judgements regarding remaining permitted capacity, unpermitted expansion airspace and compaction factors, accretion and discount rates involved a high degree of auditor judgment and an increased effort, including the use of our valuation specialists. our audit procedures related to landfill development asset amortization expense and accrued capping, closure and post-closure costs included the following, among others: •we obtained an understanding of the relevant controls related to landfill development asset amortization expense and accrued capping, closure and post-closure costs and tested such controls for design and operating effectiveness, including those over the determination of the appropriate discount and inflation rates, and the amount and timing of expected future cash flows.•we tested internal and external data used in the future cost estimates for both landfill development asset amortization expense and capping, closure and post-closure activities. •we confirmed the landfill topography drawings and results of aerial surveys directly with the third-party engineers. relevant data outputs from the topography drawings, such as permitted and unpermitted airspace, were agreed to the relevant data inputs in the cash flow analyses. •we verified permitted space to issued permits and reviewed management’s evaluation of unpermitted expansion airspace. 59table of contents•we compared the results of the auf calculated by aerial surveys to the factors utilized by the company in the cash flow analyses. •we assessed the appropriateness of the methodology used in developing the inflation rate, as well as verified the completeness and accuracy of the underlying data utilized.•with the assistance of our valuation specialists, we evaluated the company’s methodology and reasonableness of the credit adjusted risk-free rate. •we assessed the qualifications, reputation and objectivity of management’s third-party engineering specialists. self-insurance liabilities as described in note 3 of the consolidated financial statements, the company is self-insured for vehicles and workers’ compensation. the company’s self-insurance liabilities totaled $16.9 million as of december 31, 2019 and are included in accrued liabilities on the accompanying consolidated balance sheet. the liabilities for unpaid claims and associated expenses, including incurred but not reported losses, are estimated by the company with the assistance of a third-party actuary. the liability is calculated based on multiple factors and assumptions, which primarily consider the frequency and ultimate settlement amount of claims, supplemented with industry data. we identified the company’s self-insurance liabilities as a critical audit matter because of the significant judgments made by management as well as the sensitivity of the actuarial assumptions. auditing management’s judgments regarding the carried loss and allocated loss adjustment expense involved a high degree of auditor judgment and increased effort was required, including the need to involve our external actuarial specialists. our audit procedures related to the determination of the self-insurance liabilities included the following, among others:•we obtained an understanding of the relevant controls related to the self-insurance liabilities and tested such controls for design and operating effectiveness, including those over the claims processing as well as management’s determination of unpaid claims, associated expenses, and historical claims experience as compared to the data utilized in the actuarial valuation.•we tested the accuracy and completeness of the actual claims paid during the year as well as the loss and exposure data utilized in the actuarial valuation. •with the assistance of our actuarial specialists, we evaluated the reasonableness of the actuarial methodology and assumptions. our external actuarial specialists also tested the appropriateness of management’s estimates for the carried loss and allocated loss adjustment expense, by comparing management’s estimates to our independently developed estimate.•we assessed the qualifications, reputation and objectivity of management’s third-party actuarial specialists. valuation of client list intangible assets in business combinations as described in note 5 of the consolidated financial statements, the company completed the acquisition of nine businesses during the year ended december 31, 2019 for total consideration of $82.2 million. the company accounted for these transactions under the acquisition method of accounting for business combinations. accordingly, the purchase price was allocated, on a preliminary basis, to the assets acquired and liabilities assumed based on their respective fair values, including identified intangible assets of $31.2 million and resulting goodwill of $25.7 million. of the identified intangible assets acquired, the most significant included client list intangible assets of $26.8 million (the “client list intangible assets”). the company estimated the fair value of the client list intangible assets using the multi-period excess earnings method, which required management to make significant estimates and assumptions related to forecasted revenue and earnings, expected economic life of the asset, contributory asset charges, attrition rates, and the selection of discount rates.we identified the valuation of the client list intangible assets as a critical audit matter because of the significant estimates and assumptions management used in the fair value determination. auditing management’s forecasts of future cash flows as well as the selection of the discount rates required a high degree of auditor judgment and an increased extent of effort when performing audit procedures, including the use of our valuation specialists.our audit procedures related to the client list intangible assets included the following, among others:•we obtained an understanding of the relevant controls related to the valuation of the client list intangible assets and tested such controls for design and operating effectiveness, including management’s controls over forecasts of future cash flows and selection of the attrition and discount rates. •we read the purchase and sale agreements to understand and evaluate the terms of the acquisition.•we evaluated the reasonableness of management’s forecasts of future cash flows and attrition rates by comparing the projections to historical results as well as industry benchmarks, and tested the underlying data for accuracy and completeness. 60table of contents•with the assistance of our valuation specialists, we evaluated the reasonableness of the company’s valuation methodology and significant assumptions by: ◦testing the source information underlying the determination of the discount rates and verifying the accuracy of the calculations, including the contributory asset charges.◦developing an analysis for the discount rates and compared that analysis to the discount rates selected by management./s/ rsm us llp we have served as the company's auditor since 2010.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.u.s. dialysis patient service revenue recognition as discussed in notes 1 and 2 to the consolidated financial statements, the company recognized $10,619 million in u.s. dialysis patient service revenue for the year ended december 31, 2020. there are uncertainties associated with estimating u.s. dialysis patient service revenue, which generally take several years to resolve. as these estimates are refined over time, both positive and negative adjustments are recognized in the current period.f-2we identified the evaluation of the recognition of the transaction price the company expects to collect as a result of satisfying its performance obligations related to u.s. dialysis patient service revenue as a critical audit matter because it involves estimation that requires complex auditor judgment. the key assumptions and inputs used to estimate the transaction price relate to ongoing insurance coverage changes, differing interpretations of contract coverage, determination of applicable primary and secondary coverage, coordination of benefits, and varying patient characteristics impacting medicare reimbursements. changes to the key assumptions and inputs used in the application of the methodology may have a significant effect on the company’s determination of the estimate.the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls over the company’s u.s. dialysis patient service revenue recognition process, including controls related to the application of the methodology used to estimate the transaction price, and the key assumptions and inputs. we evaluated the company’s key assumptions and inputs to estimate the transaction price the company expects to collect as a result of satisfying its performance obligations by comparing key assumptions to historical collection experience, trends of refunds and payor payment adjustments, delays in the company’s billing and collection process and regulatory compliance matters. additionally, we compared u.s. dialysis patient service revenue related to the transaction price estimates recognized in prior periods to actual cash collections related to performance obligations satisfied in prior periods to analyze the company’s ability to estimate the transaction price the company expects to collect as a result of satisfying its performance obligations. we developed an estimate of u.s. dialysis patient service revenue based on actual and expected cash collections and compared to u.s. dialysis patient service revenue recorded by the company for the year-ended december 31, 2020.evaluation of the goodwill impairment analyses for the germany kidney care reporting unit as discussed in note 10 to the consolidated financial statements, the company performed annual and other impairment assessments for their reporting units throughout 2020. as a result of these assessments, the company has not recognized any goodwill impairment charges in the current year. the goodwill balance for the germany kidney care reporting unit as of december 31, 2020 was $323 million.we have identified the evaluation of the goodwill impairment analyses for the germany kidney care reporting unit as a critical audit matter. the evaluations involved assessing the key assumptions used in estimating the fair value of the reporting unit, including non-acquired patient growth rate, projected number of treatments, projected revenue growth rate, discount rates, and revenue and clinical earnings before interest, taxes, depreciation, and amortization (ebitda) multiples. evaluation of these key assumptions involved a high degree of subjectivity and auditor judgment as changes to these assumptions could have a significant impact on any goodwill impairment charges recognized.the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls over the company’s goodwill impairment assessment process, including controls over the development of key assumptions as described above. we assessed the company’s ability to forecast by comparing prior year actual results of the reporting unit to previously forecasted amounts for the reporting unit. we evaluated the company’s non-acquired patient growth rate, projected number of treatments, and projected revenue growth rate, for the reporting unit by comparing the projections to the company’s underlying business strategies and operating plans for the reporting unit, and other industry and market data. in addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:•evaluating the projected revenue growth rate for the reporting unit by comparing projected rates with comparable companies•evaluating the discount rate for the reporting unit, by comparing the inputs used to develop the discount rate to publicly available market data for comparable companies to assess whether the inputs used in the development of the discount rate are reasonable•evaluating the revenue and clinical ebitda multiples utilized in the company’s valuation of the reporting unit by comparing the multiples selected to a range of multiples from comparable transactions.evaluation of legal proceedings and regulatory matters as discussed in notes 1 and 16 to the consolidated financial statements, the company operates in a highly regulated industry and is a party to various lawsuits, demands, claims, qui tam suits, governmental investigations and audits (including, without limitation, investigations or other actions resulting from its obligation to self-report suspected violations of law) and other legal proceedings. the company records accruals for certain legal proceedings and regulatory matters to the extent an unfavorable outcome is probable and the amount of the loss can be reasonably estimated.f-3we identified the evaluation of legal proceedings and regulatory matters as a critical audit matter. due to the nature of the legal proceedings and regulatory matters, a high degree of subjectivity was required in evaluating the completeness of the company’s population of legal proceedings and regulatory matters. additionally, complex auditor judgment was required in evaluating the company’s probability of outcome assessment, and related disclosures. the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls over the company’s legal proceedings and regulatory matters process. this includes controls over the company’s determination of the completeness of the population of legal proceedings and regulatory matters, as well as controls over the company’s probability of outcome assessment, and related disclosures. we tested existing legal proceedings and regulatory matters by reading certain written correspondence received from outside parties as well as reading certain written responses provided to outside parties. we read letters received directly from the company’s external and internal legal counsel that described certain legal proceedings and regulatory matters. we involved forensic professionals with specialized skills and knowledge who inspected the company’s compliance case log. additionally, we assessed the completeness of the population of legal proceedings and regulatory matters and related disclosures by 1) inquiring of certain key executives and directors and 2) evaluating information received through procedures described above and through publicly available information about the company, its competitors, and the industry./s/ kpmg llp we have served as the company’s auditor since 2000.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. revenue recognition – refer to note 2 to the financial statements critical audit matter description the company recognizes revenue upon the transfer of control of promised products and services to customers in an amount equal to the consideration expected to be received in exchange for those products and services. the company’s leader in me subscription offering contracts often include promises to transfer multiple products or services to a customer that are considered distinct performance obligations that should be accounted for separately. the transaction price is allocated to each performance obligation on a relative standalone selling price (ssp) basis. the ssp is the price which the company would sell a promised product or service separately to a customer. in determining the ssp, the company considers the size and volume of transactions, price lists, historical sales, and contract prices.44 table of contents given the increased extent of audit effort in evaluating management’s judgments in determining ssp, we identified the determination of ssp for the leader in me membership offerings as a critical audit matter. how the critical audit matter was addressed in the audit our audit procedures related to the company’s determination of ssp for these performance obligations, included the following, among others: we tested the effectiveness of internal controls over the determination of ssp.we selected a sample of customer agreements and performed the following:obtained and read customer contracts and invoices for each selection to evaluate if relevant contractual terms have been appropriately considered by management.assessed the terms in the customer agreement and evaluated the appropriateness of management’s application of their accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions.assessed the reasonableness of management’s estimates of stand-alone selling prices for products and services and the allocation of the transaction price to identified performance obligations determined on a relative stand-alone selling basis.tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements./s/ deloitte & touche llp salt lake city, utah november 12, 2021 we have served as the company's auditor since 2016.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.goodwill impairment assessment - flexibles north america and flexibles latin america reporting units within the flexibles segment as described in notes 2 and 9 to the consolidated financial statements, the company’s consolidated goodwill balance was $5,339.3 million at june 30, 2020, and the goodwill associated with the flexibles segment was $4,369.1 million, which includes goodwill associated with the flexibles north america and flexibles latin america reporting units. management conducts an impairment analysis in the fourth quarter of each year, or whenever events and circumstances indicate an impairment may have occurred during the year. management performed a quantitative assessment for goodwill impairment, utilizing present value (discounted cash flow) methods to determine the fair value of the reporting units. if the carrying value of a reporting unit exceeds its fair value, management would recognize an impairment loss equal to the difference between the carrying value and estimated fair value of the reporting unit, adjusted for any tax benefits, limited to the amount of the carrying value of goodwill. management’s projected future cash flows for the flexibles north america and flexibles latin america reporting units included significant judgments and assumptions relating to revenue growth, projected operating income growth, terminal values, and discount rates.the principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the flexibles north america and flexibles latin america reporting units within the flexibles segment is a critical audit matter are that there was significant judgment by management when developing the fair value measurement of the reporting units. this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s projected future cash flows and significant assumptions, including revenue growth, projected operating income growth, terminal values, and discount rates. in addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. these procedures included testing the effectiveness of controls relating to management’s goodwill impairment analysis, including controls over the valuation of the flexibles north america and flexibles latin america reporting units. these procedures also included, among others, testing management’s process for developing the fair value estimate; evaluating the appropriateness of the discounted cash flow models; testing the completeness, accuracy, and relevance of underlying data used in the models; and evaluating the significant assumptions used by management, including 45revenue growth, projected operating income growth, terminal values, and discount rates. evaluating management’s assumptions related to revenue growth, projected operating income growth, and terminal values involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting units, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. professionals with specialized skill and knowledge were used to assist in the evaluation of the company’s discounted cash flow models and certain significant assumptions, including the terminal values and discount rates./s/ pricewaterhouse coopers agzürich, switzerland august 27, 2020we have served as the company's auditor since 2019.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.u.s. dialysis revenue recognition as discussed in notes 1 and 2 to the consolidated financial statements, the company recognized $10,531 million in u.s. dialysis patient service revenue for the year ended december 31, 2019. there are significant uncertainties associated with f-2estimating revenue, which generally take several years to resolve. as these estimates are refined over time, both positive and negative adjustments are recognized in the current period.we identified the evaluation of the recognition of the transaction price the company expects to collect as a result of satisfying its performance obligations related to u.s. dialysis revenue as a critical audit matter because it involves significant estimation requiring complex auditor judgment. the key assumptions and inputs used to estimate the transaction price relate to ongoing insurance coverage changes, differing interpretations of contract coverage, determination of applicable primary and secondary coverage, coordination of benefits, and varying patient characteristics impacting medicare reimbursements. changes to the key assumptions and inputs used in the methodology may have a significant effect on the company’s determination of the estimate.the primary procedures we performed to address this critical audit matter included the following. we tested certain internal controls over the company’s u.s. dialysis revenue recognition process, including controls related to the methodology used to estimate the transaction price, and the key assumptions and inputs. we developed an independent estimate of the transaction price based on actual and expected cash collections. we evaluated the company’s key assumptions and inputs to estimate the transaction price the company expects to collect as a result of satisfying its performance obligations by comparing key assumptions to historical collection experience, trends of refunds and payor payment adjustments, delays in the company’s billing and collection process and regulatory compliance matters. additionally, we compared revenue related to the transaction price estimates recognized in prior periods to actual cash collections related to performance obligations satisfied in prior periods to analyze the company’s ability to estimate the transaction price the company expects to collect as a result of satisfying its performance obligations.evaluation of the goodwill impairment analyses for the germany kidney care reporting unit as discussed in note 10 to the consolidated financial statements, the company performed annual and other impairment assessments for their reporting units throughout 2019. as a result of these assessments, the company recognized goodwill impairment charges totaling $119 million related to its germany kidney care reporting unit during 2019. the goodwill balance for the germany kidney care reporting unit as of december 31, 2019 was $295 million.we identified the evaluation of the goodwill impairment analyses for the germany kidney care reporting unit as a critical audit matter. the evaluations included assessing the key assumptions used in estimating the fair value of the reporting unit, such as forecasted revenue growth, projected profit margins, discount rates, and revenue and clinical earnings before interest, taxes, depreciation, and amortization (ebitda) multiples. evaluation of these key assumptions involved a high degree of subjectivity and auditor judgment as changes to these assumptions could have a significant impact on the goodwill impairment charges recognized.the primary procedures we performed to address this critical audit matter included the following. we tested certain internal controls over the company’s goodwill impairment assessment process, including controls over the development of key assumptions as described above. we assessed the company’s ability to forecast by comparing prior year actual results of the reporting unit to previously forecasted amounts for the reporting unit. we evaluated the company’s forecasted revenue growth rates and projected profit margins for the reporting unit by comparing the projections to the company’s underlying business strategies and operating plans for the reporting unit and other industry and market data. in addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:•evaluating the revenue growth rates and projected profit margins for the reporting unit by comparing projected rates with comparable companies; •comparing the discount rates for the reporting unit to a discount rate range that was independently developed using publicly available market data for comparable companies;•evaluating the revenue and clinical ebitda multiples utilized in the company’s valuation of the reporting unit by comparing the multiples selected to a range of multiples from comparable transactions; and•assessing the valuation methodology used by the company to estimate the fair value of the reporting unit.evaluation of legal proceedings and regulatory matters as discussed in notes 1 and 16 to the consolidated financial statements, the company operates in a highly regulated industry and is a party to various lawsuits, claims, qui tam suits, governmental investigations and audits (including investigations resulting from its obligation to self-report suspected violations of law) and other legal proceedings. the company records accruals for certain legal proceedings and regulatory matters to the extent that the company determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated.we identified the evaluation of the recorded amounts or related disclosures for these legal proceedings and regulatory matters as a critical audit matter. a high degree of auditor judgment was required due to the nature of the estimates and assumptions that are part of the company’s process. such estimates and assumptions primarily relate to the probability and corresponding estimate of the monetary loss in the event of an unfavorable outcome for the company.f-3the primary procedures we performed to address this critical audit matter included the following. we tested certain internal controls over the company’s legal proceedings and regulatory matters process, including controls over the development of significant judgments used to estimate, record, and disclose the company’s exposure related to legal proceedings and regulatory matters. we tested existing legal proceedings and regulatory matters by 1) reading certain written correspondence received from outside parties, 2) reading certain written responses provided to outside parties, and 3) obtaining invoice and cash payment documentation for a sample of transactions. we read letters received directly from the company’s external and internal legal counsel that described certain legal proceedings and regulatory matters. we also evaluated the company’s ability to estimate its monetary losses relating to legal proceedings and regulatory matters by comparing historically recorded liabilities for certain prior legal proceedings and regulatory matters to actual monetary losses incurred upon resolution of such prior legal proceedings and regulatory matters. we involved forensic professionals with specialized skills and knowledge who assisted in evaluating the company’s compliance hotline records. additionally, we assessed the population of legal proceedings and regulatory matters, as well as the sufficiency of the recorded amounts or related disclosures 1) by making inquiries of certain key executives and directors and 2) based on information received through procedures described above and through publicly available information about the company, its competitors, and the industry./s/ kpmg llp we have served as the company’s auditor since 2000.

critical audit matters the critical audit matter communicatedbelow is a matter arising from the current period audit of the financial statements that was communicated or required to be communicatedto the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and(2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters doesnot alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical auditmatter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. 51 allowance for loan losses – qualitative factors as described in note 1 – summaryof significant accounting policies and note 4 – allowance for loan losses to the consolidated financial statements, the corporationmaintains an allowance for loan losses that represents management’s best estimate of probable losses inherent in the loanportfolio. for loans that are not specifically identified for impairment, management determines the allowance for loan losses basedon historical loss experience adjusted for qualitative factors. qualitative adjustments to the historical loss experience are establishedby applying a loss percentage to the loan segments established by management based on their assessment of shared risk characteristicswithin groups of similar loans. qualitative factors are determined basedon management’s continuing evaluation of inputs and assumptions underlying the quality of the loan portfolio. managementevaluates qualitative factors by loan segment, primarily considering changes in lending policies and procedures, current economicconditions, the nature and volume of loans, the experience and depth of the lending team, delinquency trends, the loan review system,collateral values, the existence and effect of concentrations, and other external factors. qualitative factors contribute significantlyto the allowance for loan losses. management exercised significant judgment when assessing the qualitative factors inestimating the allowance for loan losses. we identified the assessment of the qualitative factors as a critical audit matter asauditing the qualitative factors involved especially complex and subjective auditor judgment in evaluating management’s assessmentof the inherently subjective estimates. the primary audit procedures we performedto address this critical audit matter included: •substantively testing management’s process, includingevaluating their judgments and assumptions for developing the qualitative factors, which included:o evaluating the completeness and accuracy of data inputs used as a basis for the qualitative factors. o evaluating the reasonableness of management’s judgments related to the determination of qualitativefactors.o evaluating the qualitative factors for directional consistency and for reasonableness.o testing the mathematical accuracy of the allowance calculation, including the application of thequalitative factors. /s/ yount, hyde & barbour, p.c. we have served as the company's auditorsince 2018.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.revenue recognition - refer to note 2 to the financial statements critical audit matter description the company recognizes revenue upon transfer of control of promised products and/or services to customers in an amount that reflects the consideration the company expects to be entitled to in exchange for those products or services. the company’s software license arrangements provide the customer with the right to use functional intellectual property (as it exists at the point in time at which the license is granted) for the duration of the contract term. implementation, support, and other services are typically considered distinct performance obligations when sold with a software license.44table of contents significant judgment is exercised by the company in determining revenue recognition for these customer arrangements, and includes the following:•determination of the term of a software license arrangement when early termination rights are provided to the customer.•determination of whether products and/or services are considered distinct performance obligations that should be accounted for separately.•determination of whether the financing component in a software licensing arrangement is significant and, if so, the discount rate used in calculating the significant financing component.•assessment of whether the extension of payment terms in a software licensing arrangement results in variable consideration and, if so, the amount to be included in the transaction price.•determination of the standalone selling price for each performance obligation, the amount allocated to each performance obligation and whether it depicts the amount that the company expects to be entitled to in exchange for the related product and/or service. as the selling prices of the company’s software licenses are highly variable, the company estimates standalone selling prices of its software licenses using the residual approach when the software license is sold with other services and observable standalone selling prices exist for the other services.given these factors, the related audit effort in evaluating management’s judgments in determining revenue recognition for software license arrangements was extensive and required a high degree of auditor judgment.how the critical audit matter was addressed in the audit our audit procedures related to the company’s accounting for software license arrangements included the following, among others:•we tested the effectiveness of controls over the review of software license arrangements, including, among others, the determination of the contract term, identification of performance obligations, determination of significant financing component, estimation of variable consideration, and determination of standalone selling prices, including those controls over the determination that software license pricing is highly variable.•we selected a sample of software license arrangements and performed the following, among others:•obtained contract source documents for each selection, including separate contracts or agreements that should be combined with the selected arrangement, and other documents that were part of the arrangement.•tested management’s determination of the contract term, identification of performance obligations, determination of significant financing component, estimation of variable consideration, and determination of standalone selling prices.•evaluated the reasonableness of the methodology and estimates used by management and the appropriateness of its revenue recognition conclusions for these key judgment areas.•tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements.•we evaluated management’s determination that software license pricing is highly variable by obtaining management’s highly variable analysis and performing the following:•testing the completeness of management’s analysis by tracing a selection of known data points from an independent internal source into the highly variable analysis.•testing the accuracy of management’s analysis by selecting a sample of contracts from the highly variable analysis, obtaining the contract and price detail, and evaluating whether discounts were appropriately included in the analysis.•testing the mathematical accuracy of management’s calculations./s/ deloitte & touche llp omaha, nebraska february 24, 2022 we have served as the company’s auditor since 2009.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.regulatory assets and liabilities - impact of rate regulation on financial statements — refer to notes 6 and 23 to the financial statements critical audit matter description the company is subject to regulation by state and federal regulatory bodies (collectively the “commissions”) which have jurisdiction with respect to the rates of electric and gas distribution. management has determined the company meets the requirements under accounting principles generally accepted in the united states of america to prepare its financial statements applying the regulated operations topic of the financial accounting standards board’s accounting standard codification.2020 form 10-k46wisconsin public service corporation table of contents rates are determined and approved in regulatory proceedings based on an analysis of the company’s costs to provide utility service and a return on, and recovery of, the company’s investment in the utility business. regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment, and the timing and amount of assets to be recovered by rates. the commissions’ regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. certain items that would otherwise be immediately recognized as revenues and expenses are deferred as regulatory assets and regulatory liabilities for future recovery or refund to customers, as authorized by the company’s regulators. future decisions of the commissions will impact the accounting for regulated operations, including decisions about the amount of allowable costs and return on invested capital included in rates, and any refunds that may be required.while the company has indicated it expects to recover costs from customers through regulated rates, there is a risk that the commissions will not approve: (1) full recovery of the costs of providing utility service, (2) full recovery of all amounts invested in the utility business and a reasonable return on that investment or (3) timely recovery of costs incurred. the company had $449.4 million and $776.2 million of regulatory assets and liabilities, respectively, as of december 31, 2020.we identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the subjectivity involved in assessing the impact of future regulatory orders on the financial statements. given that management’s accounting judgements can be based on assumptions about the outcome of future decisions by the commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process due its inherent complexities.how the critical audit matter was addressed in the audit our audit procedures related to the uncertainty of future decisions by the commissions included the following procedures, among others: •we tested the effectiveness of management’s controls over regulatory assets and liabilities, including management’s controls over the identification of costs recorded as regulatory assets and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.•we inquired of company management and independently obtained and read: (1) relevant regulatory orders issued by the state and federal commissions for the company and other public utilities, (2) company filings, (3) filings made by intervenors and (4) other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the commissions’ treatment of similar costs under similar circumstances. to assess completeness, we evaluated the information obtained and compared it to management’s recorded regulatory asset and liability balances.•for regulatory matters in process, we inspected the company’s filings with the commissions and the filings with the commissions by intervenors that may impact the company’s future rates, for any evidence that might contradict management’s assertions.•we obtained management’s analysis regarding probability of recovery for regulatory assets or refund or future reduction in rates for regulatory liabilities not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery or a future reduction in rates.•we evaluated the company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments./s/ deloitte & touche llp milwaukee, wisconsin february 25, 2021we have served as the company's auditor since 2002.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. dogfish head brand name intangible — refer to note h to the financial statements critical audit matter description the company has an indefinite lived intangible asset consisting of the dogfish head brand name (the “brand intangible asset”). as of december 26, 2020, the carrying value of the brand intangible asset was $98.5 million. management estimates the fair value of the brand intangible asset annually on its elected assessment date which is the last day of the company’s august fiscal month, using the relief-from-royalty method, which is a specific discounted cash flow method. the results of the impairment test indicated the estimated fair value of the brand intangible asset was in excess of the carrying value, and accordingly, no impairment existed. the determination of fair value requires management to make significant estimates and assumptions related to forecasts of future revenues, including growth rates for a 10-year time period, royalty rates, discount rates and the overall methodologies used to estimate the net present value of the brand intangible asset.38 we identified the valuation of the brand intangible asset as a critical audit matter because of the significant judgments and assumptions management makes in estimating the fair value of the brand intangible asset. this required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s forecasts of future revenue, and the selection of the royalty rate, discount rate, and the overall valuation methodologies utilized. how the critical audit matter was addressed in the audit our audit procedures related to the forecasts of future revenue and selection of the royalty rate, discount rate, as well as the methodologies utilized in the valuation models in estimating the fair value of the brand name intangible asset included the following, among others: •we tested the effectiveness of controls over management’s intangible asset impairment evaluation, including those over the determination of the fair value of the brand intangible asset, such as controls related to management’s forecasts of future revenue and the selection of the royalty rate and discount rate. •we evaluated management’s ability to accurately forecast future revenues by comparing actual revenues to management’s historical forecasts. •we evaluated the reasonableness of management’s forecasts of future revenues by: •comparing the projections of future revenues to historical results and internal communications to management and the board of directors. •assessing the reasonableness of the projected revenue mix based on historical revenue mix and the company’s ongoing investments in the brand. •calculating independent revenue projections based on objectively verifiable information and comparing to management’s revenue projections. •with the assistance of our fair value specialists, we evaluated the reasonableness of the management’s forecast of future revenues and the selection of the royalty rate, discount rate, and valuation methodologies by: •testing the source information underlying a) the determination of revenue growth projections, specifically the long-term growth rate b) the royalty rate and discount rate and c) testing the mathematical accuracy of the calculation. •developing a range of independent estimates for the discount rate and comparing those to the discount rate selected by management. /s/ deloitte & touche llp boston, massachusetts february 17, 2021 we have served as the company’s auditor since 2015.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.as discussed in note 2 to the financial statements, the company issues stock-based compensation in accordance with asc 718, compensation.auditing management’s calculation of the fair value of stock-based compensation can be a significant judgment given the fact that the company uses management estimates on various inputs to the calculation.to evaluate the appropriateness of the fair value determined by management, we examined and evaluated the inputs management used in calculating the fair value of the stock-based compensation./s/ rh cpa we have served as the company’s auditor since 2017.