Company: TRUE
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0001327318-25-000006
Chunk: 165

Company: TrueCar, Inc.
Filing Date: 2025-02-20
Form: 10-K
Item: Item 7
Chunk 165
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 the long-term performance of the reporting unit as 

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well as industry specific factors. Our discount rate was estimated based on a blend of market based weighted average cost of capital and venture capital rates of return, the latter of which we incorporated to more appropriately discount cash flows related to early stage products such as TrueCar+. We also performed a reconciliation of the fair value of the reporting unit to the Company’s market capitalization, which included the estimation of a reasonable control premium and other market factors such as control premiums observed in market transactions. Based on the results of the impairment test, the Company concluded that the carrying value of its single reporting unit exceeded the fair value and, accordingly, recorded a non-cash impairment charge of $59.8 million during the three months ended September 30, 2022. Actual results may differ from these forecasts and estimates that are utilized in the income approach and market capitalization reconciliation.

Business Combination

As part of the acquisition of Digital Motors, we allocated the purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets related to acquired technology and contingent liabilities. To estimate the fair value of the acquired technology, we used the replacement cost method which is based upon complex inputs and assumptions such as replacement costs, profit markup, entrepreneurial incentive, and discount rate. We amortize our intangible assets over their estimated useful lives based on the pattern in which the economic benefits associated with the asset are expected to be consumed, which to date has approximated the straight-line method of amortization. Estimating the useful life of the acquired technology requires the use of significant judgments and considers several inputs, including planned usage and expected obsolescence based on comparable internally developed software assets. We initially estimated the useful life of acquired technology as four years at the time of acquisition, but a change in estimate during the third quarter of 2023 based on a change in our planned usage resulted in revision of the useful life to three years.

The fair value of contingent liabilities were estimated at acquisition, and at least quarterly thereafter, using a scenario-based method, which uses probability-weighted possible outcomes to estimate the timing of expected future cash flows and discount rates to calculate the present value. We estimated the probability of achievement of product development milestones and future revenues based on our product roadmap, the level of effort and capacity of our technology team, and expected business outcomes. During the second quarter of 2023 the Company