How does 360 Painting determine the value at which intangible assets are stated?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
Long-lived Assets
In accordance with FASB ASC 360-10, "Accounting for Impairment or Disposal of Long-Lived Assets", long-lived assets, such as property and equipment and intangible assets, are reviewed for impairment, at least annually, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized at the amount by which the carrying amount of the asset exceeds the fair value of the asset. The Company did not recognize any impairment charges for the years ended December 31, 2024 or 2023.
Goodwill
Goodwill represents the excess of acquisition costs over the fair value of assets and liabilities acquired, including specifically identified intangible assets. Goodwill is not amortized but is tested for impairment annually as of the last day of each fiscal year in line with guidance prescribed by FASB ASU 2021-03 "Accounting Alternative for Evaluating Triggering Events" and evaluated if the facts and circumstances at year end indicate if any triggering event existed.
In conducting impairment testing, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If the Company performs a qualitative assessment and determines that the carrying value more likely than not exceeds the fair value, then the quantitative impairment test is performed, otherwise no further analysis is required. The Company also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. The ultimate outcome of the goodwill impairment assessment will be the same whether the Company chooses to perform the qualitative assessment or proceed directly to the quantitative impairment test. The Company chose to perform a qualitative impairment test for goodwill as of December 31, 2024 and 2023. The Company determined the fair value of goodwill exceeds the carrying value and no further analysis is required as of December 31, 2024 and 2023.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to the 2025 FDD, 360 Painting reviews its long-lived assets, including intangible assets, for impairment at least annually. This review also occurs whenever events or changes in circumstances suggest that the carrying amount of an asset may not be recoverable. The recoverability of these assets is assessed by comparing the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset.
If the carrying amount of the asset exceeds its estimated future cash flows, 360 Painting recognizes an impairment charge. This charge is equivalent to the amount by which the carrying amount of the asset surpasses its fair value. The FDD states that 360 Painting did not recognize any impairment charges for the years ended December 31, 2024, or 2023.
Goodwill, which represents the excess of acquisition costs over the fair value of acquired assets and liabilities, including specifically identified intangible assets, is not amortized. Instead, it undergoes impairment testing annually on the last day of each fiscal year, following the guidance prescribed by FASB ASU 2021-03, "Accounting Alternative for Evaluating Triggering Events." Goodwill is also evaluated if year-end circumstances indicate any triggering event existed.
360 Painting has the option to first assess qualitative factors to determine whether events or circumstances suggest that the estimated fair value of a reporting unit is less than its carrying amount. If a qualitative assessment indicates that the carrying value more likely than not exceeds the fair value, a quantitative impairment test is performed. Alternatively, 360 Painting may elect to proceed directly to the quantitative impairment test without performing the qualitative assessment. For the years ended December 31, 2024 and 2023, 360 Painting chose to perform a qualitative impairment test for goodwill and determined that the fair value of goodwill exceeds the carrying value, requiring no further analysis.