Company: NPO
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0001164863-25-000009
Chunk: 375

Company: Enpro Inc.
Filing Date: 2025-02-21
Form: 10-K
Item: Item 7
Chunk 375
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 existing technology and $14.0 million of in-process research and development were recorded. Management uses the income approach to determine the fair value of intangible assets, including the multi-period excess earnings method. The key assumptions used in valuing the assets include projected revenues and profit margins, obsolescence factors, contributory asset charges, tax rates, discount rates, and long-term growth rates.

The principal considerations for our determination that performing procedures relating to the valuation of existing technology and in-process research and development acquired in the acquisition of AMI is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the existing technology and in-process research and 

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development acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to (a) projected revenues and profit margins, the obsolescence factor, the discount rate, and the long-term growth rate for existing technology and (b) projected revenues and profit margins, and the obsolescence factor for in-process research and development; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.  

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 testing the effectiveness of controls relating to the acquisition accounting, including controls over the valuation of the existing technology and in-process research and development acquired. These procedures also included, among others (i) reading the purchase agreement; (ii) testing management’s process for developing the fair value estimate of the existing technology and in-process research and development acquired; (iii) evaluating the appropriateness of the multi-period excess earnings method used by management; (iv) testing the completeness and accuracy of the underlying data used in the multi-period excess earnings method; and (v) evaluating the reasonableness of the significant assumptions used by management related to (a) projected revenues and profit margins, the obsolescence factor, the discount rate, and the long-term growth rate for existing technology and (b) projected revenues and profit margins, and the obsolescence factor for in-process research and development. Evaluating management’s assumptions related to (a) projected revenues and profit margins, and the long-term growth rate for existing technology and (b) the projected revenues and profit margins for  in-process research and development involved considering (i) the current and past performance of the AMI business; (ii) the consistency with external market and industry data;