Moderna Inc
For the period ended Dec 31, 2023. Filed Feb 23, 2024.
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FY2023 · Filed Feb 23, 2024
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Item 8. Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Moderna, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Moderna, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, 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 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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 31, 2023, 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 23, 2024, 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.
| Reserves for returns on product revenue | |
| Description of the Matter | During the year ended December 31, 2023, the Company’s net product revenues for Spikevax were $6.7 billion. As explained in Note 2 of the consolidated financial statements, revenue from product sales includes estimates of variable consideration for which reserves are established, including reserves for product returns.Auditing the Company’s measurement of reserves for product returns under its contracts with wholesalers, distributors and retail customers (collectively, “Customers”) was especially challenging because (1) it involves management assumptions about inventory remaining in the distribution channel as of the balance sheet date that could be subject to return in future periods and projected market demand, and (2) the Company has limited returns history on which to base its assumptions. |
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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 to determine reserves for returns on product revenue. For example, we tested controls over management’s review of the completeness and accuracy of the data used in the process and the assumptions about the amount of inventory in the distribution channel that could be subject to return in future periods. To test the Company’s reserves for returns on product revenue, our audit procedures included, among other procedures, testing the accuracy and completeness of the underlying data used in the calculations and evaluating the assumptions used by management to estimate its reserves. To test management’s assumptions, we inspected agreements with significant Customers to validate the rights of return, made inquiries of members of the commercial function regarding any changes to the terms and conditions of commercial contracts. We also examined credit memos issued during and after year end for unusual items or trends not consistent with the Company’s analysis of product returns and performed revenue cutoff testing at period end to assess whether there were unusual trends that should have been considered in the Company analysis of product returns. In addition, we reviewed inventory on hand-reporting from significant Customers at the balance sheet date and subsequent to the balance sheet date and inspected vaccination data from third-party sources through the report date. We also performed sensitivity analyses over the Company’s return rate to assess the effect of changes in assumptions. |
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| Raw Material Inventory Write-downs | |
| Description of the Matter | As of December 31, 2023, the Company had $0.4 billion of inventory. As disclosed in Note 2, inventory is recorded at the lower of cost or net realizable value. The Company periodically reviews the composition of inventory in order to identify excess, obsolete, slow-moving or otherwise unsaleable items. For the year ended December 31, 2023, inventory write-downs were $2.2 billion, which included $903 million in raw material inventory write-downs resulting from the Company’s long-range financial planning process in the third quarter of 2023.Auditing management's estimates for raw material inventory write-downs involved especially subjective auditor judgment because the estimates rely on a number of factors that are affected by market and economic conditions outside the Company’s control. In particular, raw material inventory write-downs are sensitive to significant assumptions, including the expected demand for the Company’s products and the expiration dates of the raw materials. |
| 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 raw material inventory write-down process including management’s review of the significant assumptions described above and controls over the completeness and accuracy of the information used to develop the estimates.To test the Company’s raw material inventory write-downs, our audit procedures included, among other procedures, testing the accuracy and completeness of the underlying data used in the calculations and evaluating the assumptions used by management in its estimates. Our testing of the data used in the Company’s estimates included the accuracy of the raw material expiration dates used, materials required in the Company’s products, and any alternate uses. We evaluated the Company’s forecast of future demand, including testing of the significant assumptions within its forecast, and evaluating the consistency of the forecast with that used by management for other purposes. We also performed sensitivity analyses to assess the impact of changes in significant assumptions to the raw material inventory write-downs and evaluated any contrary evidence identified. |
/s/Ernst & Young LLP
We have served as the Company’s auditor since 2014.
Boston, Massachusetts
February 23, 2024
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