How does 360 Painting define 'goodwill' in its financial statements?

According to 360 Painting's 2025 Franchise Disclosure Document, goodwill is defined as the excess of acquisition costs over the fair value of acquired assets and liabilities, including specifically identified intangible assets. 360 Painting does not amortize goodwill. Instead, the company tests it for impairment annually on the last day of each fiscal year, following the guidelines in FASB ASU 2021-03, "Accounting Alternative for Evaluating Triggering Events." They also evaluate if the facts and circumstances at year end indicate if any triggering event existed.

In simpler terms, goodwill represents the intangible value 360 Painting acquires when purchasing another business, such as brand reputation or customer relationships. Instead of gradually writing off this value (amortizing), 360 Painting assesses each year whether the value of the goodwill has declined (impaired). This assessment is based on specific accounting standards and considers any events that might trigger a decline in value.

For a prospective 360 Painting franchisee, understanding how goodwill is handled in the company's financial statements provides insight into its acquisition strategies and financial health. The impairment testing ensures that the company's assets are accurately valued, reflecting a realistic financial position. This can be relevant if the franchisee is considering the long-term stability and growth potential of 360 Painting.