Company: LGN
Filing Date: 2025-02-14
Form Type: DRS
Source: 0000950123-25-002471
Chunk: 233

Company: Legence Corp.
Filing Date: 2025-02-14
Form: DRS
Chunk 233
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 that can contribute to changes in estimates of contract cost and profitability, which may cause fluctuations in gross profit and gross profit margin from period to period. Given the significant judgment necessary to estimate the cost to complete for contracts where the Company applies the cost-to-costinput method, auditing these estimates required extensive audit effort due to the complexity of the estimates and a high degree of auditor judgment when evaluating the results of audit procedures. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to costs to complete for fixed price contracts included the following, among others:

| • |     | We evaluated the reasonableness and consistency of the methods and assumptions used by management to estimate 
 cost to complete on fixed price contracts.                                                                    |

| • |     | We evaluated the accuracy of estimated cost to complete by comparing current gross margin to historical gross 
 margin for selected fixed price contracts.                                                                    |

| • |     | We evaluated the estimates of cost to complete by performing corroborating inquiries with the Company’s                  
 project managers and comparing the estimates to management’s supporting documents for those estimates, where applicable. |

Goodwill—Refer to Notes 2 and 5 to the financial statements Critical Audit Matter Description Goodwill is evaluated for impairment at the reporting unit level on an annual basis. Fair value of a reporting unit is estimated based on a market approach and an income approach. The income approach utilizes discounted future cash flows. Assumptions critical to the fair value estimate of the discounted cash flow model include the revenue growth rate, forecasted margins, and discount rate. We identified goodwill for the reporting unit with an impairment as a critical audit matter because of the significant judgments made by management to estimate the fair value of the reporting unit under the income approach. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the revenue growth rate, forecasted margins and the discount rate. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the revenue growth rate, forecasted margins, and discount rate used by management to estimate the fair value of the reporting unit included the following, among others:

| • |     | We evaluated the revenue growth rate and forecasted margins by comparing management’s estimate to historical 
 actual results.                                                                                              |

| • |     | We evaluated the reasonableness of management’s revenue growth rate and forecasted margins by comparing the 
 forecasts to information included in industry reports and analyst reports of comparable companies.          |

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