Company: CODI-PB
Filing Date: 2025-12-08
Form Type: 10-K/A
Source: 0001345126-25-000078
Chunk: 210

Company: Compass Diversified Holdings
Filing Date: 2025-12-08
Form: 10-K/A
Chunk 210
---
. The results of the impairment testing indicated that the fair value of the customer relationship did not exceed the carrying value and we recorded impairment expense of $1.2 million at December 31, 2023 and $2.4 million at December 31, 2022. The customer relationship intangible asset had no remaining value at December 31, 2023.

#### Lugano - Inventory
We believe that determination of the cost of Lugano’s inventory is a critical accounting estimate because of the findings of the Lugano Investigation and gaps in certain historical documentation. As such, we leveraged all available corroborating evidence to support Lugano’s inventory value, including inventory appraisals, revenue testing, and validated vendor purchases.

#### Lugano - Financing Arrangements
The Company has identified cash flows with certain individuals at our Lugano subsidiary for which the underlying financial arrangements have not been identified. Management has recorded the net cash flows from these arrangements as current liabilities similar to a line of credit. To account for the possibility of interest, Management has recorded estimated interest using the higher of the statutory rate in the jurisdiction in which the investor resides or the California statutory interest rate. The estimation of interest and liability is subject to uncertainty due to absence in certain instances of documentation related to the underlying financing arrangements and the interpretation of laws. The actual results could vary materially from the amounts recorded in the consolidated financial statements when the arrangements themselves are discovered.

#### Allocation Interests
At the time of our Initial Public Offering, we issued Allocation Interests governed by our LLC agreement that entitle the holders (the "Holders") to receive distributions pursuant to a profit allocation formula upon the occurrence of certain events. The Holders are entitled to receive, if due pursuant to the profit allocation formula, an allocation payment upon the sale of a business (a "Sale Event") and upon election of the Holder during the 30-day period following the fifth anniversary of the date upon which we acquired a controlling interest in a business (a "Holding Event"). The payment to the Holders for a Sale Event is based on the pre-tax gain from the sale of the business, as part of the gain is allocated to the Holders and reduced by the tax that would be due on the sale transaction by the Company. Payments of profit allocation to the Holders are accounted for as dividends declared on Allocation Interests and recorded in stockholders' equity once they are approved by our Board.

#### Recent Accounting Pronouncements
Refer to " Note B - Summary of Significant Accounting Policies " included in