Company: RCUS
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0001724521-25-000040
Chunk: 1

Company: Arcus Biosciences, Inc.
Filing Date: 2025-02-25
Form: 10-K
Item: Item 8
Chunk 1
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 to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter 

The critical audit matter communicated below is a matter arising from the current period audit of the 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 financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the 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.

72

Accounting for agreements with Gilead Sciences, Inc. Description of the Matter As described in Notes 3 and 5 to the consolidated financial statements, the Company has ongoing Option, License and Collaboration Agreements with Gilead Sciences, Inc., a related party, referred to as the “Gilead Agreements”, which resulted in the recognition of $243 million of revenue for the year ended December 31, 2024 and $319 million of deferred revenue at December 31, 2024. Of the revenue recognized under the Gilead Agreements in 2024, $215 million related to amounts recognized as revenue when services are performed, based on the level of effort expended in a given period in relation to the total effort expected to be incurred to satisfy the applicable performance obligation. Management periodically updates its estimates of the total effort expected to be incurred to satisfy such performance obligations, with any changes in estimate potentially changing the amount of revenue previously recognized and/or the amount to be recognized in future periods.Auditing the Company’s process for estimating the total effort expected to be incurred to satisfy such performance obligations is complex due to the significant judgment applied by the Company in determining the total effort.How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls