Company: HEI-A
Filing Date: 2025-12-22
Form Type: 10-K
Source: 0000046619-25-000082
Chunk: 68

Company: HEICO CORP
Filing Date: 2025-12-22
Form: 10-K
Item: Item 7
Chunk 68
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13,182 Intercompany management fee 4,236 Intercompany interest income 9,488 Intercompany dividends99,327 

Critical Accounting Estimates

    We believe that the following are our most critical accounting estimates, which require management to make judgments about matters that are inherently uncertain.

    Assumptions utilized to determine fair value in connection with business combinations, contingent consideration arrangements and in goodwill and intangible assets impairment tests are highly judgmental.  If there is a material change in such assumptions or if there is a material change in the conditions or circumstances influencing fair value, we could be required to recognize a material impairment charge.  See Item 1A., Risk Factors, for a list of factors which may cause our actual results to differ materially from anticipated results.

Valuation of Inventory

Inventory is reported at the lower of cost or net realizable value, determined using either the first-in, first-out method or the average cost basis.  Any losses are recognized entirely in the period of identification.

We regularly assess the carrying value of inventory, considering factors such as its physical condition, sales trends, and anticipated future demand to estimate provisions for slow-moving, obsolete, or damaged inventory.  Our inventory valuation reserves are established through analysis and estimates that consider many factors such as current order levels, forecasted demand, market conditions, and expected product life cycles.  Changes in business or economic conditions, consumer confidence, market dynamics, demand fluctuations, evolving technology, or inaccurate demand projections may necessitate adjustments to these reserves.  Should actual market conditions deviate from management's expectations, additional provisions for excess and obsolete inventory could be required and may be material to our results of operations.  Changes 

45

in estimates did not have a material effect on net income from consolidated operations in fiscal 2025, 2024 and 2023.

Business Combinations

We allocate the purchase price of acquired entities to the underlying tangible and identifiable intangible assets acquired and liabilities and any noncontrolling interests assumed based on their estimated fair values, with any excess recorded as goodwill.  Determining the fair value of assets acquired and liabilities and noncontrolling interests assumed requires management’s judgment and often involves the use of significant estimates and assumptions.  For example, the fair value of intangible assets acquired considers forecasts of future cash flows, revenue, earnings, royalty rates, discount rates and asset lives.  We determine the fair values of intangible assets acquired generally in consultation with third-party valuation advisors.

As part of the agreement to acquire certain subsidiaries