Company: TDY
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0001094285-25-000053
Chunk: 281

Company: TELEDYNE TECHNOLOGIES INC
Filing Date: 2025-02-21
Form: 10-K
Item: Item 7
Chunk 281
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 of the discount rate by developing a range of independent estimates and comparing those to the discount rate selected by management.

Indefinite-Lived Trademarks – Refer to Notes 2, 4, and 6 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of indefinite-lived trademarks for impairment involves the comparison of the fair value of indefinite-lived trademark to the respective carrying value.  For indefinite-lived trademark impairment testing using the quantitative approach, the Company estimated the fair value of its trademarks primarily through the use of a relief from royalty approach based on its best estimate of amounts and timing of projected revenues and compared the estimated fair value to the carrying value of the corresponding trademark.  The FLIR indefinite-lived trademark balance was $635.8 million as of December 29, 2024, which is a component of the Company’s acquired intangible assets, net, balance of $2,012.9 million as of December 29, 2024.  The application of the relief from royalty method requires management to make significant estimates and assumptions related to projected revenues and the selected discount rate.

Given the significant estimates and assumptions made by management to estimate the fair value of the FLIR indefinite-lived trademark and the difference between the FLIR indefinite-lived trademark’s fair value and carrying value, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions, specifically related to the projected revenues and the selected discount rate, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to (1) revenue projections and (2) the selection of the discount rate used to estimate the fair value of the indefinite-lived trademarks included the following, among others:

•We tested the effectiveness of management’s controls over the revenue projections and discount rate used to estimate the fair value of the FLIR indefinite-lived trademark.

•We evaluated the reasonableness of the revenue projections by comparing them to (1) FLIR and third-party historical financial data, (2) current economic factors and analyst reports of the Company and companies in its peer group, (3) industry reports, (4) assumptions used by the Company in its budgeting process, and (5) order backlog. 

•We performed a sensitivity analysis by varying projected revenue assumptions.

•With the assistance of our fair value specialists, we performed an analysis comparing applicable industry forecasted long-term revenue growth rate to management’s projected revenues used within the valuation model