Company: CRCT
Filing Date: 2025-03-05
Form Type: 10-K
Source: 0001828962-25-000039
Chunk: 1

Company: Cricut, Inc.
Filing Date: 2025-03-05
Form: 10-K
Item: Item 8
Chunk 1
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 whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. 

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory – Valuation

As described in Notes 2 and 5 to the consolidated financial statements, the Company’s inventories consist of raw materials and finished goods. Inventories are valued at the lower of average cost or net realizable value, inclusive of adjustments for excess and obsolescence. At December 31, 2024, the Company had inventories of $134.3 million, net of $49.0 million in reserves, including reserves for excess and obsolescence. 

We identified the auditing of certain inputs to the reserves for excess and obsolescence, which include SKU quantities and first sold date, historical sales and usage data, as well as assumptions over product life and customer 

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demand as a critical audit matter. Auditing these inputs and assumptions involved especially challenging auditor judgment due to the nature and extent of audit effort required to address this matter.

The primary procedures we performed to address this critical audit matter included: 

•Testing the completeness and accuracy of underlying data inputs utilized in the reserves. 

•Evaluating the reasonableness of management’s assumptions through obtaining supporting documentation, performing inquiries, and assessing customer demand using historical results. 

•Testing the mathematical accuracy of the reserves.

•Evaluating the reasonableness of the assumptions used in calculating the