Company: NPO
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0001164863-25-000009
Chunk: 572

Company: Enpro Inc.
Filing Date: 2025-02-21
Form: 10-K
Item: Item 8
Chunk 572
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 completeness and accuracy of the underlying data used in the discounted cash flow approach; and (iv) evaluating the reasonableness of the significant assumptions used by management related to projected revenues and profit margins, and the discount rate. Evaluating management’s assumptions related to projected revenues and profit margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Semiconductor reporting unit; (ii) the consistency with external market and industry data; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow approach and (ii) the reasonableness of the discount rate assumption.

Acquisition of AMI – Valuation of Existing Technology and In-Process Research and Development

As described in Notes 1 and 2 to the consolidated financial statements, on January 29, 2024, the Company acquired all of the equity securities of AMI for $209.4 million, net of cash acquired. Of the identifiable intangible assets acquired, $106.0 million of 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