Company: SXI
Filing Date: 2025-08-04
Form Type: 10-K
Source: 0001437749-25-024450
Chunk: 466

Company: STANDEX INTERNATIONAL CORP/DE/
Filing Date: 2025-08-04
Form: 10-K
Item: Item 3
Chunk 466
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, and performing corroborating inquiries with the Company’s operational management; 

  o  tested the accuracy and completeness of the costs incurred to date for the performance obligation to supporting documentation; and 

  o  tested the mathematical accuracy of management’s calculation of revenue for the contract. 

  ●  We evaluated management’s ability to estimate total costs and profits accurately by comparing actual costs and profits to management’s historical estimates for performance obligations that have been fulfilled. 

  ●  We tested the effectiveness of controls for revenue recognized over time, including management’s controls over the estimates of total costs and profit for performance obligations. 

Acquisitions – Amran/Narayan Group Customer Relationships Intangible Asset – Refer to note 2 to the financial statements 
 
Critical Audit Matter Description
 
The Company completed the acquisition of Amran LLC and Narayan Powertech Private Limited collectively the “Amran/Narayan Group”. The Company accounted for the 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 customer relationships intangible asset of $107 million. Management estimated the fair value of the customer relationships intangible asset using the multi-period excess earnings method, which is a specific discounted cash flow method. The fair value determination of the customer relationships intangible asset required management to make significant estimates and assumptions related to future cash flows and the selection of the discount rate.
 
We identified the customer relationships intangible asset for the Amran/Narayan Group as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of the 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 cash flows and the selection of the discount rate for the customer relationship intangible asset.
 
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 discount rate for the customer relationships intangible asset included the following, among others:
 
  ●  We assessed the reasonableness of management’s forecasts of future cash flows by comparing the projections to historical results and certain external market information. 

  ●  With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate by: 

  o  Testing the source information underlying the determination