Company: HGBL
Filing Date: 2025-03-13
Form Type: 10-K
Source: 0000950170-25-038691
Chunk: 14

Company: Heritage Global Inc.
Filing Date: 2025-03-13
Form: 10-K
Item: Item 15
Chunk 14
---
 reporting. Accordingly, we express no such opinion. 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 

Critical Audit Matter

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation Allowance for Deferred Tax Assets

As described in Notes 2 and 13 to the financial statements, the Company recognizes deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. The Company establishes a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. The valuation allowance was $3.5 million as of December 31, 2024. We identified the valuation allowance on deferred tax assets as a critical audit matter due to the high degree of judgment in projecting the realization of net operating losses.

F-1

The primary procedures we performed to address this critical audit matter include the following: 

•Obtained an understanding of management’s estimate regarding the valuation allowance on the net operating losses including the method, assumptions, and data used to develop the estimate by reviewing managements prepared memorandum and supporting schedules.

•Examined the underlying data used in determining the valuation allowance on the net operating losses, including historical financial data and prior utilization of net operating losses. 

•Evaluated the Company’s projections of future taxable income for reasonableness.

•Reviewed tax provision and other disclosures related to the tax provision

Allowance for Credit Losses over Notes Receivable

As described in