Company: LGN
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0002052568-25-000018
Chunk: 52

Company: Legence Corp.
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 8
Chunk 52
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”), which are related parties. The agreement provides that the Company will pay to the TRA Members 85% of the net cash savings that the Company realizes, or is deemed to realize, as a result of favorable tax attributes arising from the IPO and Corporate Reorganization. The annual tax benefits are computed on a with and without basis by calculating the income taxes due, including such tax benefits, and the income taxes due without such benefits. The Company will retain the benefit of the remaining 15% of these cash savings, if any.Amounts payable under the TRA are accounted for in accordance with ASC Topic 450, Contingencies. Accordingly, the Company recognizes a liability when payments are probable and reasonably estimable and measures the obligation on an undiscounted basis. The TRA liability is classified as current or non-current based on the expected date of payment and is included in the Condensed Consolidated Balance Sheet as Accrued and other current liabilities and Tax receivable agreement liability, respectively.The TRA liability and related deferred tax assets, net of valuation allowance, initially recognized are recorded against Additional paid-in capital. Subsequent changes to the TRA liability and deferred tax assets, including changes to the related valuation allowance, that are not related to an exchange or a payment pursuant to the TRA are recorded in Other income, net and Income tax expense, respectively, in the Condensed Consolidated Statement of Operations.Refer to "Note 14—Tax Receivable Agreement" and "Note 15—Income Taxes" for additional information.Recent Accounting PronouncementsTargeted Improvements to the Accounting for Internal-Use Software - In September 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2025-06, "Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software" ("Update 2025-06"), which removes references to the project stages and requires entities to begin capitalizing software costs when both of the following occur: (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended. Update 2025-06 is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. Early adoption and a prospective, retrospective or modified transition approach are permitted. The Company is currently evaluating the impact that the