Company: RILYN
Filing Date: 2025-09-19
Form Type: 10-K
Source: 0001464790-25-000011
Chunk: 132

Company: B. Riley Financial, Inc.
Filing Date: 2025-09-19
Form: 10-K
Item: Item 8
Chunk 132
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3 Investments 

Description of the Matter

As discussed in Note 2(v) of the financial statements, the Company estimates the fair value of level 3 investments, which includes equity securities and loans receivable, at fair value. At December 31, 2024, the Company reported equity securities and loans receivable, at fair value of approximately $40.5 million and $90.1 million, respectively.

Management uses judgment to determine the significant assumptions used in valuation models to record level 3 investments at their fair value using level 3 inputs. These level 3 inputs are unobservable, supported by little or no market activity, and are significant to the fair value of level 3 investments. Evaluating management’s significant assumptions to determine the fair value of level 3 investments was complex and required judgment, particularly when evaluating level 3 

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inputs such as discount rates, projected earnings before interest income, interest expense, income taxes, and depreciation and amortization (“EBITDA”), multiples of EBITDA, multiples of sales, market price of related securities, market interest rates and expected annualized volatility rates. These significant assumptions are affected by expectations about future economic and industry factors as well as estimates of the investee’s future growth.

The principal considerations for our determination that performing procedures relating to the valuation of certain level 3 investments is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of certain level 3 investments, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the aforementioned significant unobservable level 3 inputs used in the valuation of level 3 investments, and (iii) the audit effort involved the use of firm employed valuation specialists with specialized skill and knowledge.

How We Addressed the Matter in Our Audit 

Our audit procedures related to the valuation of level 3 investments to address this critical audit matter included the following:

•Obtained an understanding of the control environment related to the Company’s process to determine the reasonableness of significant assumptions used in valuation models to record level 3 investments at their fair value and evaluated the design effectiveness of the relevant controls.     

•Tested the completeness, accuracy and reliability of level 3 inputs used by management in valuation models.

•Tested the mathematical accuracy of the valuation models used to determine the fair values of level 3 investments.

•With the assistance of firm employed valuation specialists, evaluated the reasonableness of valuation models and significant assumptions