Company: ROK
Filing Date: 2025-11-12
Form Type: 10-K
Source: 0001024478-25-000116
Chunk: 131

Company: ROCKWELL AUTOMATION, INC
Filing Date: 2025-11-12
Form: 10-K
Item: Item 4
Chunk 131
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 a third-party actuarial valuation firm to assist in determining certain assumptions and in calculating the estimated liability. The estimated liability is based on currently available information and assumptions, including projections of future claims, dismissal rates, average settlement values, inflation rates, and the ratio of defense costs to indemnity payments.

 In the fourth quarter of 2025, the Company elected to change its accounting policy for asbestos-related defense costs from expensing as incurred to accruing for all future defense costs for both known and unknown claims. The total liability, including defense costs, is $441 million at September 30, 2025.

 We identified the asbestos claim liability as a critical audit matter because of the significant judgments made by management to estimate the liability. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists, when performing audit procedures to evaluate the reasonableness of management's estimates and assumptions related to estimated future claims development, the estimated resolution or outcome of these claims, and the estimated claim resolution costs and defense costs.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the asbestos liability included the following, among others:

•We tested the effectiveness of internal controls over the valuation of the liability, including relevant assumptions and work of management’s expert.

•We evaluated the methods and assumptions used by the Company to determine the estimated liability by: 

◦Testing the underlying indemnity and defense cost data, that served as inputs for the actuarial analysis, including testing historical and pending claims by comparing key attributes to accounting records and legal documents to assess the accuracy and completeness of the data.

◦With the assistance of our actuarial specialists, we evaluated whether the estimate of future claims used in the Company’s calculations was reasonable, and also whether the number of claims expected to be dismissed or sustained and the estimated claim resolution costs and defense costs were reasonable in relation to historical claim trends at the Company.

◦With the assistance of our actuarial specialists, we evaluated the reasonableness of the Company’s approach in determining the estimates of the reserve for indemnity and defense costs on future claims.

•We tested the effectiveness of internal controls over the accounting conclusion for the change in accounting principle for defense costs in the current year.

•With the assistance of professionals in our firm having expertise in technical accounting, we evaluated the specific factors that management considered to conclude that a change in the manner of accounting for asbestos-related defense costs represents an accounting policy change that should be accounted for