Company: JOUT
Filing Date: 2025-12-12
Form Type: 10-K
Source: 0001140361-25-045348
Chunk: 53

Company: JOHNSON OUTDOORS INC
Filing Date: 2025-12-12
Form: 10-K
Item: Item 15
Chunk 53
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, or complex judgments. The communication of the critical audit matters 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 matters below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of Obsolete and Excess Inventory Reserve

As described within Notes 1 and 15 to the consolidated financial statements, the consolidated gross inventory balance as of October 3, 2025 was $192,453,000, and $21,727,000 in reserves, for a consolidated net inventory balance of $170,726,000, of which a significant portion relates to the Fishing segment. The Company values inventory at the lower of cost (determined using the first-in, first-out method) or net realizable value. Management develops assumptions when estimating the inventory reserves based on expected future demand, market conditions, and industry conditions.

We identified the value of the obsolete and excess inventory related to the Fishing segment as a critical audit matter as there was a high degree of auditor judgment and increased audit effort when performing audit procedures given the subjective nature of the significant assumptions utilized by management.

Our audit procedures related to the Company’s evaluation of the obsolete and excess inventory reserve for the Fishing segment include the following primary procedures, among others:  

•We obtained an understanding of the relevant controls related to the obsolete and excess inventory and tested such controls for design and operating effectiveness. 

F-4

•We tested the completeness of the inventory population subject to the obsolete and excess reserve, and in addition,we recalculated the reserve and confirmed that calculation conformed to the Company policy for inventory reserves.

•We performed a retrospective review of current year activity compared to prior year estimates to evaluate management's estimation accuracy.

•We evaluated the reasonableness of management's significant assumptions related to predicted or internally developed forecasted product demand.

Goodwill Impairment 

As described in Note 1 to the consolidated financial statements, the Company's goodwill balance was $10,456,000 at October 3, 2025, and is recorded in the Diving reporting unit..  Goodwill is tested for impairment at least annually, at the reporting unit level, by comparing the estimated fair value of the reporting unit to its carrying value. The Company uses a discounted cash flow model, which is considered an income valuation approach, to estimate the fair value of the Diving reporting unit. When the carrying value of the reporting unit exceeds its fair value,