Company: ST
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0001477294-25-000022
Chunk: 2

Company: Sensata Technologies Holding plc
Filing Date: 2025-02-28
Form: 10-K
Item: Item 8
Chunk 2
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, and terminal growth rate. The determination of the fair value using the market approach requires management to make significant assumptions related to the EBITDA multiple. Changes in these assumptions could have a significant impact on the fair value of the reporting unit and the amount of any goodwill impairment recognized. In the third quarter of 2024, impairment indicators were identified that suggested the carrying value of the Dynapower reporting unit could exceed the fair value. As such the Company performed an evaluation to determine the fair value of the Dynapower reporting unit. As a result of this evaluation, the Company determined the Dynapower reporting unit’s carrying value exceeded its fair value and recorded an impairment charge of $150.1 million during the third quarter of 2024, representing a portion of its goodwill balance. The Dynapower reporting unit’s fair value was further evaluated as of October 1, 

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2024 as part of the Company’s annual goodwill impairment analysis, which did not result in any further impairments of the Dynapower reporting unit’s goodwill balance.

Given the significant estimates and assumptions management made to estimate the fair value of the Dynapower reporting unit, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the forecasts of future revenues and EBITDA margins, estimate of the discount rate, and the selection of the terminal growth rate and EBITDA multiple required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. 

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future revenues, EBITDA margins and multiples, and the selection of the discount rate and terminal growth rate for the Dynapower reporting unit included the following, among others:   

•Evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.

•Evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results, (2) internal communications to management, and (3) external information, such as peer company revenue and EBITDA growth rates, and industry reports.

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

◦the discount rate and terminal growth rate, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rate and terminal growth rate selected by management.

◦the EBITDA multiple, including testing the underlying source information and