Company: GAME
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001641172-25-004869
Chunk: 1317

Company: GameSquare Holdings, Inc.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 8
Chunk 1317
---
 indicate it is more likely
than not that the fair value of a reporting unit is less than its carrying amount. Reporting units were tested for impairment by comparing
their fair values to their carrying values.

As discussed in Note 7 to the consolidated financial
statements, as a result of the impairment assessment, the Company recorded impairment loss of $11.4 million related to the Stream Hatchet
and Sideqik reporting units. The carrying value of goodwill as of December 31, 2024 was $12.7 million. Auditing the Company’s impairment
assessment was complex and required significant auditor judgment due to the significant estimation uncertainty in determining the fair
value of the respective reporting units. Management used a combination of income and market-based approaches to estimate the fair value
of each reporting unit. A significant emphasis is placed on the appropriateness of the estimate considerations used by management to determine
the fair value of reporting units due to the sensitivity of the fair value to the underlying assumptions. The significant assumptions
include forecasted revenues and the discount rate used to discount future cash flows. These significant assumptions related to the fair
value of these reporting units are forward-looking and could be affected by future economic and market conditions.

How
the Critical Audit Matter Was Addressed in the Audit

In
testing the valuation of each reporting unit, we performed audit procedures that included, among others:

    ■
    Obtaining
    an understanding of internal controls over the Company’s process for determining the fair value of reporting units used in
    the impairment assessment. This included controls over management’s development of the above-described assumptions
    used in the valuation model applied. 

    ■
    Evaluating
    the Company’s use of the income and market-based approaches and testing the significant assumptions used in the model, as
    described above. 

    ■
    We
    evaluated the completeness and accuracy of underlying data used in supporting the assumptions and estimates. 

    ■
    We
    evaluated the reasonableness of significant assumptions such as the projected revenue growth used within the forecast against
    analyst expectations, industry trends, market trends, and other market information. 

    ■
    We
    involved valuation specialists to assist in evaluating the Company’s use of the income and market-based approaches and
    selection of the discount rate. Our valuation specialists evaluated the discount rate by comparing it against a discount rate range
    that was independently developed using publicly available market data for comparable entities.

Revenue recognition 

Description of the Matter

As described