Valuation of TauRx by Auditors
The Corporation’s investment in TauRx
Pharmaceuticals Ltd. totalling $65.5 million as at
December 31, 2023 was categorized as level 3
within the fair value hierarchy. For this investment,
management used the discounted cash flow
technique to determine the fair value. Management
is required to use its own assumptions regarding
unobservable inputs as there is little, if any, market
activity in these instruments or related observable
inputs that can be corroborated at the
measurement date. Significant unobservable inputs
used included the discount rate and probability of
success.
We considered this a key audit matter due to the
judgment applied by management in determining
the fair value. This in turn led to a high degree of
auditor judgment and subjectivity in performing
procedures to test the fair value determined by
management. Professionals with specialized skill
and knowledge in the field of valuation assisted us
in performing our procedures.
Our approach to addressing the matter included the
following procedures, among others:
With the assistance of professionals with skill
and knowledge in the field of valuation,
developed an independent point estimate of the
fair value for the private investment, which
included the following:
Developed independent assumptions
related to market comparables by
considering relevant market and industry
data and prices on recent transactions.
Tested the underlying data used in
developing the independent point estimate.
Compared the independent point estimate
to management’s estimate to evaluate the
reasonableness of management’s estimate.
Evaluated the sufficiency of the related
disclosures in the consolidated financial
statements