Company: PACB
Filing Date: 2025-03-17
Form Type: 10-K
Source: 0001299130-25-000061
Chunk: 762

Company: PACIFIC BIOSCIENCES OF CALIFORNIA, INC.
Filing Date: 2025-03-17
Form: 10-K
Item: Item 3
Chunk 762
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 implied multiples of those companies. Key assumptions include, but are not limited to, revenue and operating income growth rates, discount rates and other factors. We consider peer revenues and earnings trading multiples from companies that have operational and financial characteristics that are similar to the asset under measurement and estimated weighted-average costs of capital. Different assumptions from those made in our analysis could materially affect projected cash flows and the evaluation of assets for impairment. We also consider our market capitalization as a part of our analysis. We may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative goodwill impairment test.

Fiscal 2024 Form 10-K77

Significant estimates and assumptions used in the income approach during the fourth quarter of 2024, included revenue growth expectations and a discount rate of 12.0%. The discount rate was based on the weighted average cost of capital, determined using market, peer company, industry data, and related risk factors. The assumptions used were inherently subject to uncertainty and small changes in these assumptions could have had a significant impact on the concluded value. An increase of 100 basis points to the discount rate used in our assessment would have resulted in additional goodwill impairment of approximately $95 million. The assessed fair value was deemed reasonable based on a market capitalization reconciliation. See Note 4. Balance Sheet Components in Part II, Item 8 of this Annual Report on Form 10-K for further information.

During the IPR&D impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair value of the IPR&D is less than the carrying amount. The qualitative factors include, but are not limited to, macroeconomic conditions, industry-specific conditions, and company-specific conditions. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair value of the IPR&D is less than the carrying amount, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the estimated fair value of the IPR&D with the carrying value. If the carrying amount of the IPR&D exceeds the fair value, we record an impairment loss based on the difference. We generally perform our impairment test using an income approach to determine the fair value of IPR&D. The income approach utilizes estimated discounted cash flows. If a quantitative assessment is performed, the evaluation includes management estimates of cash flow projections based on internal future projections. Key assumptions include, but are not limited to, revenue projections, revenue growth rates, discount rates and other factors.