Company: DBRG
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0001679688-25-000017
Chunk: 60

Company: DigitalBridge Group, Inc.
Filing Date: 2025-02-21
Form: 10-K
Item: Item 1A
Chunk 60
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 at least quarterly based on the fair value guidelines set forth by GAAP. The fair value measurement accounting guidance establishes a hierarchal disclosure framework that ranks the observability of market inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, will generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

Investments for which market prices are not observable include, but are not limited to, illiquid investments in operating companies, real estate, energy ventures and structured vehicles, and encompass all components of the capital structure, including equity, mezzanine, debt, preferred equity and derivative instruments such as options and warrants. Fair values of such investments are determined by reference to (1) the market approach (i.e., multiplying a key performance metric of the investee company or asset, such as earnings before interest, income tax, depreciation and amortization ("EBITDA"), by a relevant valuation multiple observed in the range of comparable public entities or transactions, adjusted by management as appropriate for differences between the investment and the referenced comparables), (2) the income approach (i.e., discounting projected future cash flows of the investee company or asset and/or capitalizing representative stabilized cash flows of the investee company or asset) and (3) other methodologies such as prices provided by reputable dealers or pricing services, option pricing models and replacement costs. We periodically engage independent valuation firms to assess and validate our valuation models; however, there can be no assurance that these valuations accurately reflect market conditions. 

The determination of fair value using these methodologies takes into consideration a range of factors including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, the multiples of comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. Valuation approaches depend on key assumptions such as discount rates, growth projections, projected holding period and exit multiples, which are inherently uncertain and subject to change. Our valuation approach often relies on applying exit multiples derived from comparable public companies or precedent transactions. However, these multiples are subject to market fluctuations and may not accurately reflect actual exit values at the time of realization. Uncertainty in the