Explorer

During the year the issuer acquired multiple businesses and determined the fair values of certain acquired intangible assets using forecasted cash flows and related assumptions. The firm's approach for substantively testing the fair values of the acquired intangible assets was to test the issuer's process. With respect to another acquired business the following deficiency was identified: · The issuer assumed liabilities related to warrants as a result of this acquisition and recorded a gain related to the change in the fair values of these liabilities between the acquisition date and year end. The firm did not sufficiently test this gain because it did not perform any procedures to evaluate the reasonableness of the fair values of these liabilities recorded at the acquisition date. (AS 2501.07)

During the year the issuer acquired a business and determined the fair value of certain acquired intangible assets using cash-flow forecasts. The following deficiencies were identified: · The firm did not perform any procedures to evaluate the reasonableness of certain significant assumptions that the issuer used in these cash-flow forecasts. (AS 2501.16)

During the year the issuer acquired a business and determined the fair value of certain acquired intangible assets using cash-flow forecasts. The following deficiencies were identified: · The firm did not sufficiently evaluate the reasonableness of certain other significant assumptions that the issuer used in these cash-flow forecasts including not sufficiently taking into account the issuer's intent and ability to carry out these cash-flow forecasts because its procedures were limited to comparing these assumptions to historical financial information and reading a purchase commitment agreement for one customer. (AS 2501.16 and .17)

During the year the issuer acquired two businesses and determined the fair values of certain acquired intangible assets using cash-flow forecasts. For one business combination the issuer engaged a specialist to determine the fair values of certain acquired intangible assets and contingent consideration. The firm's approach for substantively testing the fair values of these intangible assets and the contingent consideration was to test the issuer's process. The following deficiencies were identified: · The firm did not sufficiently evaluate the reasonableness of certain significant assumptions developed by the company's specialist or the issuer and used by the company's specialist including not sufficiently taking into account the issuer's intent and ability to carry out the cash-flow forecasts that assumed significant revenue growth because its procedures were limited to inquiring of management comparing these assumptions to historical financial information and for the first year of the cash-flow forecasts using historical financial information to corroborate management's explanations for certain differences between these assumptions and actual results. (AS 1105.A8b; AS 2501.16 and .17)

During the year the issuer acquired a business and determined the fair value of certain acquired intangible assets using forecasted revenue which the firm identified as a significant assumption. The firm did not evaluate the reliability of certain historical revenue data from the acquiree that was used to develop these revenue forecasts. (AS 1105.04 and .06)