Company: AEHR
Filing Date: 2025-01-13
Form Type: 10-Q
Source: 0001654954-25-000285
Chunk: 8

Company: AEHR TEST SYSTEMS
Filing Date: 2025-01-13
Form: 10-Q
Item: Part I, Item 1
Chunk 8
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 Form 10-K for the year ended May 31, 2024. Except for the accounting policies related to Business Combination and Goodwill and Intangible Assets, as discussed below, there have been no significant changes to these accounting policies during the three and six months ended November 29, 2024. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting estimates in these Condensed Consolidated Financial Statements include valuation of inventory at the lower of cost or net realizable value, valuation of intangible assets and impairment of long-lived assets and goodwill. Actual results could differ from those estimates. Business Combination The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair values. Goodwill is measured as the excess of the consideration transferred over the fair value of assets acquired and liabilities assumed on the acquisition date. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed, these estimates are inherently uncertain and subject to refinement. Key estimates and assumptions in valuing certain of the intangible assets and goodwill the Company has acquired include, but are not limited to, expected future cash flows from acquired developed technology, customer relationships, and trade names. Unanticipated events and circumstances could impact the accuracy or validity of such assumptions, estimates or actual results. The authoritative guidance allows a measurement period of the purchase price allocation that ends when the entity has obtained all relevant information about facts that existed at the acquisition date, and that cannot exceed one year from the date of acquisition. As a result, during the measurement period the Company may record adjustments to the fair values of assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that it identifies adjustments to the preliminary purchase price allocation. Upon conclusion of the measurement period or final determination of the values of the assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments will be recorded in the consolidated statements of operations.

 9Table of Contents

Goodwill Goodwill represents the excess of the total purchase price over the fair value of net identifiable assets acquired in a business combination. The Company assesses goodwill for impairment annually during each fourth fiscal quarter or whenever events or changes in circumstances indicate the carrying value may not be fully recoverable. In the valuation of goodwill, management estimates future cash flows to be derived