Company: GPI
Filing Date: 2025-02-14
Form Type: 10-K
Source: 0001031203-25-000013
Chunk: 95

Company: GROUP 1 AUTOMOTIVE INC
Filing Date: 2025-02-14
Form: 10-K
Item: Item 8
Chunk 95
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 assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Intangible Franchise Rights in Acquisitions and Impairment Assessments — Refer to Notes 1, 3 and 13 to the consolidated financial statements

Critical Audit Matter Description

During the year ended December 31, 2024, the Company acquired 67 dealerships. The acquisitions were accounted for as business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including indefinite-lived intangible assets, related to rights under franchise agreements with manufacturers. The fair value of acquired intangible franchise rights is estimated using the income approach. 

The Company’s annual impairment assessment for intangible franchise rights is performed in the fourth quarter, or more frequently if events or circumstances indicate possible impairment. In evaluating intangible franchise rights for impairment, a qualitative assessment is initially performed to determine whether it is more-likely-than-not that an impairment exists. If it is concluded that it is more-likely-than-not that an impairment exists, a quantitative assessment is performed. The fair value is estimated using a discounted cash flow model, or income approach. The Company’s impairment assessments performed in fiscal year 2024 resulted in an impairment of $28.2 million of intangible franchise rights.

F-2

We identified the fair value of acquired intangible franchise rights for the acquisitions, the qualitative impairment assessments for certain franchise rights, as well as the fair value estimates used in the quantitative impairment assessments of intangible franchise rights as a critical audit matter because of the