Company: CODI-PB
Filing Date: 2025-12-08
Form Type: 10-K/A
Source: 0001345126-25-000078
Chunk: 232

Company: Compass Diversified Holdings
Filing Date: 2025-12-08
Form: 10-K/A
Chunk 232
---
 skill and knowledge, in evaluating the available audit evidence related to the impact of the results of the Investigation on the Company’s financial statements. Such judgment, subjectivity, and work effort related to the necessary adjustments to revenue, inventory, and subsidiary financing arrangements, among other financial statement line items.

Our audit procedures related to the Investigation included the following, among others.

• We evaluated the impact the material weaknesses resulting from the Investigation had on the nature, timing, and extent of our audit procedures.

• We evaluated the sufficiency of the Investigation conducted by the Audit Committee as well as the impact of the results of the Investigation on our audit approach.

• We selected a sample of revised revenue activity to determine whether recognition was properly supported by inspecting available evidence such as cash receipts, customer acceptance/acknowledgement, customer invoices, and shipping documentation.

• We performed new physical observations of inventory and inspected, on a sample basis, cash disbursements and other evidence available to support the existence and accuracy of inventory on hand. We utilized professionals with specialized skill and knowledge in performing these procedures. We also tested the completeness and accuracy of the inventory rollback schedule from the physical observation date to each respective balance sheet date.

• We selected a sample of inventory on hand and inspected cash disbursements and other evidence available to support the accuracy and rights of inventory recorded.

• We tested the completeness and accuracy of the Company’s subsidiary financing arrangements through: (1) understanding management’s process to identify these transactions based on the Investigation results; (2) vouching details to underlying agreements, cash receipts and disbursements; (3) confirming amounts owed and terms and conditions with the respective counter parties; and (4) evaluating the proper accounting for such agreements in accordance with accounting principles generally accepted in the United States of America.

• We evaluated the adequacy of the disclosures included in the consolidated financial statements related to the restatement.

Acquisition of The Honey Pot Co. (“THP”) – Fair Value of Tradename Intangible Asset Acquired

As described further in Note D to the consolidated financial statements, the Company completed the acquisition of THP on January 31, 2024, for consideration of approximately $377.3 million. The identifiable intangible assets acquired includes a tradename, which has been recorded by management at its estimated acquisition date fair value of $225.0 million. We identified the valuation of the tradename intangible asset in the THP acquisition as a critical audit matter.

The principal consideration for our determination that the valuation of the tradename is