Company: INSP
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001609550-25-000011
Chunk: 87

Company: Inspire Medical Systems, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 8
Chunk 87
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 the overall presentation of the 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 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 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 account or disclosures to which it relates.

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Table of Contents

Reserves for excess and obsolete inventoryDescription of the Matter At December 31, 2024, the Company’s net inventory balance was $80.1 million, which included reserves for excess and obsolete inventory of $1.0 million. As explained in Note 2 to the consolidated financial statements, the determination of a reserve for excess and obsolete inventory involves management exercising judgment to determine the required reserve, considering future demand, product life cycles, introduction of new products and current market conditions.Auditing management’s estimate for excess and obsolete inventory reserves involved subjective auditor judgment because of the assumptions and judgments used in determining the excess and obsolete inventory reserves, including future demand, technological or market obsolescence resulting from the introduction of new products, and possible alternative uses for existing products.How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company's process to determine the amount of the Company’s reserve for excess and obsolete inventory. This included controls over the Company’s review of the significant assumptions and judgments used in determining the reserve estimates. To test the adequacy of the Company's excess and obsolete inventory reserves, we performed audit procedures that included, among others, testing the accuracy and completeness of the underlying data used in the reserve calculations. We performed analytical procedures to evaluate the assumptions and judgments used in determining the inventory reserves, specifically future demand and possible alternative uses. We performed inquiries of Company personnel and inspected regulatory approvals to assess the assumptions used in determining the technological or market obsolescence resulting from the introduction of new products. We also audited management’s calculation of the inventory reserves by testing the mathematical accuracy of the Company’s reserve calculations.

/s/Ernst & Young LLP

We have served as the Company's auditor since 2015