Company: PACB
Filing Date: 2025-03-17
Form Type: 10-K
Source: 0001299130-25-000061
Chunk: 659

Company: PACIFIC BIOSCIENCES OF CALIFORNIA, INC.
Filing Date: 2025-03-17
Form: 10-K
Item: Item 1A
Chunk 659
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. We generally perform our impairment test using an income approach to determine the fair value of IPR&D. The income approach utilizes estimated discounted cash flows. If a quantitative assessment is performed, the evaluation includes management estimates of cash flow projections based on internal future projections. Key assumptions include, but are not limited to, revenue projections, revenue growth rates, discount rates and other factors. Different assumptions from those made in our analysis could materially affect projected cash flows and the evaluation of assets for impairment. We may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative impairment test. There is substantial risk inherent in forecasting revenues and spend associated with research and development, including assumptions around the timing and level of resources and investment to be made.

Significant estimates and assumptions used in the income approach during the fourth quarter of 2024, included revenue growth assumptions, a discount rate of 14.0%, and an obsolescence factor of 13 years. The carrying value of the IPR&D exceeded its estimated fair value, and we recorded an impairment of $40.0 million in the fourth quarter of 2024, primarily due to a decrease in projected cash flows. An increase of 100 basis points to the discount rate used in our analysis would have resulted in additional IPR&D impairment of approximately $5 million. A decrease of one year to the obsolescence factor used in our analysis would have resulted in additional IPR&D impairment of approximately $5 million. See Note 4. Balance Sheet Components in Part II, Item 8 of this Annual Report on Form 10-K for further information.

Assumptions and estimates about future values are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. For example, if our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of our reporting unit, or if there is a delay in development of the IPR&D or lower projected sales, we may be required to record future impairment charges for goodwill and intangible assets with indefinite lives. Impairment charges could materially decrease our future results of operations and result in lower asset values on our balance sheet. 

Intangible Assets and Other Finite-Lived Assets — Impairment Assessment

We capitalize finite-lived intangibles assets and generally amortize them on a straight-line basis over