Company: PRTA
Filing Date: 2025-02-27
Form Type: 10-K
Source: 0001559053-25-000009
Chunk: 152

Company: PROTHENA CORP PUBLIC LTD CO
Filing Date: 2025-02-27
Form: 10-K
Item: Item 8
Chunk 152
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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of accrued research and development costs and related prepaid expenses

As discussed in Notes 2 and 4 to the consolidated financial statements, research and development costs are expensed by the Company as incurred. As of December 31, 2024, the Company recognized accrued research and development costs of $13.4 million and prepaid research and development expenses of $12.0 million. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to the Company by its vendors, including contract research organizations, on their actual costs incurred. Expense accruals related to clinical trials are recognized based on the Company’s estimate of the degree of completion of the events specified in the specific clinical study or trial contract. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the consolidated financial statements as prepaid or accrued research and development. 

We identified the evaluation of certain prepaid and accrued research and development costs relating to contract research organizations and investigative sites as a critical audit matter. Complex and subjective auditor judgment was involved in evaluating the estimated degree of completion of the events specified in the specific clinical study or trial contract used to determine certain prepaid and accrued research and development costs due to the nature and extent of evidence available. 

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to prepaid and accrued research and development costs. This included