Company: IRDM
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001628280-25-005302
Chunk: 113

Company: Iridium Communications Inc.
Filing Date: 2025-02-13
Form: 10-K
Item: Item 8
Chunk 113
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 we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of an internal control related to the Company’s process to determine changes in the estimated useful lives of its satellites. We evaluated the factors the Company used to determine the estimated useful lives of the satellites by:

•comparing the Company’s useful life estimates to the manufacturer’s estimated design life, the Company’s longevity assessment for the satellites, and the lives of its first-generation satellite constellation 

•reading publicly available information on the estimated useful lives of similar assets

•inquiring of operations and engineering management personnel regarding satellite operation and performance

•evaluating the effect of changes, if any, in the Company’s long-term strategy for use of the assets on the useful life estimates. 

Evaluation of acquisition-date fair value of customer relationships

As discussed in Note 12 to the consolidated financial statements, on April 1, 2024, the Company acquired the remaining 80.5% of the outstanding shares and voting interest of Satelles, Inc. that was not previously owned by the Company for consideration totaling $125.5 million. The Company accounted for the acquired business using the acquisition method of accounting by recording assets acquired and liabilities assumed at their respective fair values. As part of the transaction, the Company acquired customer relationship intangible assets with an acquisition date fair value of $57 million, which was determined using the multi-period excess earnings method.

We identified the evaluation of the fair value of customer relationship intangible assets acquired in the Satelles, Inc. transaction as a critical audit matter. Subjective auditor judgment was involved in evaluating certain assumptions, including the forecasted revenue growth, forecasted revenue attributable to customer contracts, forecasted earnings before interest, taxes, depreciation, and amortization (EBITDA) margins, and the discount rate used to value the customer relationships. Changes in these assumptions used could have a significant impact on the acquisition-date fair value of this intangible asset.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls over the assumptions discussed above. We evaluated the forecasted revenue growth, forecasted revenue attributable to customer contracts, and EBITDA margins used to value the customer relationships by comparing them to those of the Company’s peers and Satelles Inc.’s historical and forecasted results. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company’s discount rate used