Company: CRL
Filing Date: 2025-02-19
Form Type: 10-K
Source: 0001100682-25-000011
Chunk: 127

Company: CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
Filing Date: 2025-02-19
Form: 10-K
Item: Item 8
Chunk 127
---
 These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the reporting unit; (ii) evaluating the appropriateness of the market-based approach and the income approach used by management; (iii) testing the completeness and accuracy of underlying data used in the market-based approach and the income approach; and (iv) evaluating the reasonableness of the significant assumptions used by management related to earnings multiples and sales multiples used in the market-based approach and future revenue, long term growth rates, operating income margins, and discount rate used in the income approach. Evaluating management’s assumptions related to future revenue and operating income margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the 

57

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

Biologics reporting unit; (ii) the consistency with external market and industry data; and (iii) whether the 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 market-based approach and the income approach, as well as the weighted combination of the approaches and (ii) the reasonableness of the earnings multiples, sales multiples, long term growth rates, and discount rate assumptions.

Revenue Recognition using Cost-to-Cost Method – Discovery and Safety Assessment 

As described in Notes 1 and 3 to the consolidated financial statements, the Company recognized Discovery and Safety Assessment (DSA) revenue from services and products transferred over time of $2,446.8 million for the year-ended December 28, 2024, of which a significant portion relates to services that are delivered to the customer based on the extent of progress towards completion of the performance obligation that management measures using the cost-to-cost (input) method. The Company uses the cost-to-cost measure of progress when it best depicts the transfer of value to the customer, which occurs as the Company incurs costs on its contract, generally related to fixed fee service contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. The cost calculation includes variables such as labor hours, allocation of overhead costs, research model costs, and subcontractor costs. Revenue is recorded proportionally as costs are incurred.

The principal considerations for our determination that performing procedures relating to DSA revenue recognized using the cost-to-cost method is