Company: TDY
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0001094285-25-000053
Chunk: 181

Company: TELEDYNE TECHNOLOGIES INC
Filing Date: 2025-02-21
Form: 10-K
Item: Item 7
Chunk 181
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 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.

Goodwill – FLIR Reporting Unit - Refer to Notes 2, 4, and 6 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to the respective carrying value.  For goodwill impairment testing using the quantitative approach, the Company used a combination of the discounted cash flow approach and the market approach to estimate fair value of the FLIR reporting unit.  The Company’s goodwill balance was $7,990.5 million as of December 29, 2024, of which $5,827.1 million was allocated to the FLIR reporting unit.  The application of the discounted cash flow model requires management to make significant estimates and assumptions related to projected revenues and the selected discount rate.

Given the significant estimates and assumptions made by management to estimate the fair value of the FLIR reporting unit and the difference between the FLIR reporting unit’s fair value and carrying value, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions, specifically related to the projected revenues and selected discount rate, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to (1) revenue projections and (2) the selection of the discount rate used to estimate the fair value of the goodwill acquired included the following, among others:

•We tested the effectiveness of management’s controls over the revenue projections and discount rate used to estimate the fair value of the FLIR reporting unit.

•We evaluated the reasonableness of the revenue projections by comparing them to (1) FLIR and third-party historical financial data, (2) current economic factors and analyst reports of the Company and companies in its peer group, (3) industry reports, (4) assumptions used by the Company in its budgeting process, and (5) order backlog.

•We performed a sensitivity analysis by varying projected revenue assumptions. 

•With the assistance of our fair value specialists, we performed an analysis comparing applicable industry forecasted long-term revenue growth rate to management’s projected revenues used within the valuation model.

•With the assistance of our fair value specialists, we evaluated the reasonableness