ILLUMINA INC
For the period ended Dec 29, 2024. Filed Feb 12, 2025.
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FY2024 · Filed Feb 12, 2025
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Illumina, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Illumina, Inc. (the Company) as of December 29, 2024 and December 31, 2023, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 29, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 29, 2024 and December 31, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 29, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 12, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 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 Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| GRAIL Contingent Consideration | |
| Description of the Matter | In connection with the August 18, 2021 acquisition of GRAIL, the Company recognized a contingent consideration liability at the estimated fair value on the acquisition date. The Company uses a Monte Carlo simulation model to determine the fair value of the contingent consideration liability each reporting period. As disclosed in Note 4 of the consolidated financial statements, the fair value of the contingent consideration liability as of December 29, 2024 is $71 million. The Company recognized a $315 million gain in the current year as a result of the change in the fair value of the contingent consideration liability.Auditing the valuation of the contingent consideration liability was complex and required significant auditor judgment due to the estimation uncertainty in evaluating the reasonableness of a significant assumption, which is the revenue risk premium. A significant emphasis is placed on the appropriateness of the estimate considerations used by management to determine the fair value of the GRAIL contingent consideration due to the sensitivity of the fair value to changes in the revenue risk premium. The revenue risk premium is forward-looking and could be affected by future economic and market conditions. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's process for determining the fair value of the contingent consideration liability related to GRAIL. This included controls over management’s development of the above-described assumption used in the valuation model applied. In testing the valuation of the contingent consideration liability, we performed audit procedures that included, among others, evaluating the Company’s use of the Monte Carlo simulation model and testing the significant assumption used in the model, as described above. We evaluated the completeness and accuracy of underlying data used in supporting the assumption and estimate. In addition, we involved valuation specialists to assist in evaluating the Company’s use of the Monte Carlo simulation model and selection of the revenue risk premium. Our valuation specialists evaluated the revenue risk premium by comparing it against a range that was independently developed using publicly available market data for comparable entities. |
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| Impairment assessment of GRAIL in-process research and development (IPR&D) | |
| Description of the Matter | The Company tests indefinite-lived intangible assets for impairment annually, as of May, or more frequently if events or circumstances indicate it is more likely than not that the fair value of an asset is less than its carrying amount. The Company identified a triggering event that occurred in the three months ended June 30, 2024 that required an interim impairment test. GRAIL IPR&D was tested for impairment by comparing its fair value to its carrying value. As disclosed in Note 5 of the consolidated financial statements, as a result of the interim impairment assessment, the Company recorded an impairment loss of $420 million related to GRAIL IPR&D. The carrying value of IPR&D following the impairment assessment was $140 million. The Company divested GRAIL on June 24, 2024. Auditing the Company’s IPR&D impairment assessment was complex and required significant auditor judgment due to the significant estimation uncertainty in determining the fair value of GRAIL IPR&D. Management used an income approach to estimate the fair value of GRAIL IPR&D. A significant emphasis is placed on the appropriateness of the estimate considerations used by management to determine the fair value of GRAIL IPR&D due to the sensitivity of the fair value to the underlying assumptions. The significant assumptions include forecasted revenues for GRAIL IPR&D and the discount rate used to discount future cash flows. These significant assumptions related to the fair value of GRAIL IPR&D are forward-looking and could be affected by future economic and market conditions. |
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's process for determining the fair value of GRAIL IPR&D. This included controls over management’s development of the above-described assumptions used in the valuation model applied.In testing the valuation of GRAIL IPR&D, we performed audit procedures that included, among others, evaluating the Company’s use of the income approach and testing the significant assumptions used in the model, as described above. We evaluated the completeness and accuracy of underlying data used in supporting the assumptions and estimates. We evaluated the reasonableness of projected revenue growth used within the valuation against industry trends, market trends, and other market information. In addition, we involved valuation specialists to assist in evaluating the Company’s use of the income approach and selection of the discount rate. Our valuation specialists evaluated the discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities. |
/s/Ernst & Young LLP
We have served as the Company’s auditor since 2000.
San Diego, California
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