Company: BLCO
Filing Date: 2025-02-19
Form Type: 10-K
Source: 0001860742-25-000004
Chunk: 496

Company: Bausch & Lomb Corp
Filing Date: 2025-02-19
Form: 10-K
Item: Item 2
Chunk 496
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-customer sales and the sales mix.The principal considerations for our determination that performing procedures relating to Medicaid rebates for certain product categories is a critical audit matter are (i) the significant judgment by management when developing the estimate of Medicaid rebates for certain product categories; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the terms of state government-managed Medicaid programs; 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 management’s estimation of provisions for Medicaid rebates, including controls over the assumptions used to estimate these rebates for certain product categories. These procedures also included, among others (i) developing an independent estimate of Medicaid rebates for certain product categories by utilizing third-party information on inventory levels in the distribution channel, the terms of the specific Medicaid rebate programs, and the historical trends of actual Medicaid rebate claims paid, adjusted for price and projected market conditions; (ii) comparing the independent estimate for these Medicaid rebates to management’s estimates to evaluate the reasonableness of management’s estimate; and (iii) testing, on a sample basis, Medicaid rebates for certain product categories processed by the Company, including evaluating those claims for consistency with the contractual terms of the Company’s arrangements and policies. Professionals with specialized skill and knowledge were used to assist in evaluating whether the Company’s Medicaid rebate program policies and methodology for estimating Medicaid rebates are compliant with the Center for Medicare and Medicaid Services and federal regulations.Acquisition of Elios Vision, Inc. – Valuation of In-Process Research and Development Asset and Product BrandsAs described in Notes 2 and 4 to the consolidated financial statements, on December 10, 2024, the Company acquired Elios Vision, Inc. (Elios Vision) for aggregate purchase consideration of approximately $188 million. Of the intangible assets acquired, $95 million of acquired in-process research and development (IPR&D) asset and $63 million of product brands were recorded. The fair value of the identifiable intangible assets was determined by management using the income approach, which requires a forecast of the expected future cash flows, including revenue growth rates, cost of goods sold, operating expenses and discount rates.The principal considerations for our determination that performing procedures relating to the valuation of the IPR&D asset and product brands acquired in the acquisition of Elios Vision is a critical