Company: GPI
Filing Date: 2025-02-14
Form Type: 10-K
Source: 0001031203-25-000013
Chunk: 97

Company: GROUP 1 AUTOMOTIVE INC
Filing Date: 2025-02-14
Form: 10-K
Item: Item 8
Chunk 97
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.K. reporting unit exceeded the carrying value as of the assessment date and, therefore, no impairment was recognized. 

We identified the fair value estimates used in the U.K. reporting unit goodwill impairment assessment as a critical audit matter because of the significant estimates and assumptions management makes related to forecasts of revenue growth rates, future EBITDA margins, weighted average cost of capital, valuation multiples, and terminal growth rate. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s assumptions. 

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures for the impairment assessment related to the forecasts of revenue growth rates, future EBITDA margins, weighted average cost of capital, valuation multiples, and terminal growth rate included the following, among others: 

•We tested the effectiveness of internal controls over the goodwill impairment assessment, including those over the inputs, assumptions, and calculations used in determining fair value of the reporting unit.

•We evaluated the reasonableness of management’s forecasts of revenue growth rates and future EBITDA margins by comparing the forecasts to:

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◦The Company’s historical revenue and EBITDA margins.

◦Internal communications to management and the Board of Directors.

◦Current industry, market and economic trends. 

•We performed a sensitivity analysis of certain assumptions such as revenue growth rates, future EBITDA margins, weighted average cost of capital, valuation multiples, and terminal growth rate to evaluate the potential change in the fair value resulting from changes in underlying assumptions.

•With the assistance of our fair value specialists, we evaluated the reasonableness of the weighted average cost of capital, valuation multiples, and terminal growth rate by:

◦Developing a range of independent estimates and comparing those to the weighted average cost of capital and valuation multiples selected by management.

◦Testing the source information underlying the determination of the terminal growth rate and testing the mathematical accuracy of the calculations.

/s/ Deloitte & Touche LLP

Houston, Texas

February 14, 2025

We have served as the Company’s auditor since 2020.

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GROUP 1 AUTOMOTIVE, INC. 

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)As of December 31,20242023ASSETSCURRENT ASSETS:Cash and cash equivalents$34.4 $57.2 Contracts-in-transit and vehicle