Company: SWKH
Filing Date: 2025-03-20
Form Type: 10-K
Source: 0001628280-25-013989
Chunk: 70

Company: SWK Holdings Corp
Filing Date: 2025-03-20
Form: 10-K
Item: Item 1B
Chunk 70
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 receivables were carried at $277.8 million as of December 31, 2024, which is net of the allowance for credit losses of $11.2 million. The Company generated $40.8 million of finance receivable interest income, including fees, for the year ended December 31, 2024. As explained in Note 1 to the consolidated financial statements, the Company’s finance receivables are stated at amortized cost, net of unamortized origination fees, if any, and allowance for credit losses. Interest income on the finance receivables is recorded on an accrual basis based using the effective interest rate method to the extent that the Company expects to collect such amounts. The Company evaluates the collectibility of both interest and principal for each finance receivable to determine whether it is impaired. A finance receivable is considered to be impaired when, based on current information and events, the Company determines it is probable that it will be unable to collect amounts due according to existing contractual terms. When a finance receivable is considered to be impaired, the amount of loss is calculated by comparing the carrying value of the finance receivable to the value determined by discounting the expected future cash flows. If actual cash flows were to be substantially lower than estimated, there could be a significant adverse impact on the carrying value of the Company’s finance receivables, related finance receivable interest income, and the Company’s results of operations.

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The principal considerations for our determination that performing procedures relating to valuation of the finance receivables and related finance receivable interest income is a critical audit matter is the overall impact on the consolidated financial statements, including the realization of the Company’s deferred tax assets, and the significant amount of judgement by management in developing the assumptions of the expected future cash flows which, in turn, led to significant auditor judgement, subjectivity, and effort in performing audit procedures and evaluating audit evidence relating to the expected future cash flows. Additionally, for certain finance receivables, there may be limited historical data with which to evaluate the expected future cash flows.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) evaluating management’s process and valuation method for developing the estimate of expected cash flows of its finance receivables and potential credit losses; (ii) testing the completeness and accuracy of the underlying data used in the estimate; and (iii) evaluating management’s assumptions used to estimate future