Under what conditions does 7 Brew evaluate the recoverability of the carrying value of its long-lived assets?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset are less than the carrying amount of the asset, the asset cost is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value.
There was no asset impairment for the years ended December 29, 2024, December 31, 2023, and December 25, 2022.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 82)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, the company evaluates the recoverability of the carrying value of its long-lived assets when certain events or circumstances suggest that the current carrying amount of those assets may not be recoverable. This evaluation is triggered by indicators that the asset's value might be impaired.
If 7 Brew tests a long-lived asset for recoverability and determines that the undiscounted estimated future cash flows expected from using and eventually disposing of the asset are less than its carrying amount, the asset's cost is adjusted to its fair value. This adjustment results in the recognition of an impairment loss. The impairment loss is calculated as the difference between the asset's carrying amount and its fair value, reflecting the reduction in the asset's recorded value on the company's balance sheet.
The 2025 FDD states that there was no asset impairment for the years ended December 29, 2024, December 31, 2023, and December 25, 2022. This indicates that, for those specific years, 7 Brew did not have to write down the value of any of its long-lived assets due to impairment, suggesting stable asset values during that period. A prospective franchisee should be aware of these accounting practices, as they can impact the company's reported financial performance and overall financial health.