How does Americas Best Value Inn evaluate the recoverability of an asset group?
Americas_Best_Value_Inn Franchise · 2025 FDDAnswer from 2025 FDD Document
We test long-lived asset groups, including finite-lived intangible assets, for recoverability when changes in circumstances indicate the carrying value may not be recoverable. For example, when there are material adverse changes in projected revenues or expenses, significant underperformance relative to historical or projected operating results, or significant negative industry or economic trends. We also perform a test for recoverability when management has committed to a plan to sell or otherwise dispose of an asset group. We evaluate recoverability of an asset group by comparing its carrying value to the future net undiscounted cash flows that we expect will be generated by the asset group. If the comparison indicates that the carrying value of an asset group is not recoverable, we recognize an impairment loss for the excess of carrying value over the estimated fair value. When we recognize an impairment loss for assets to be held and used, we depreciate the adjusted carrying amount of those assets over their remaining useful
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 70–71)
What This Means (2025 FDD)
According to the 2025 Franchise Disclosure Document, Americas Best Value Inn assesses the recoverability of long-lived asset groups, including finite-lived intangible assets, when circumstances suggest that the carrying value may not be recoverable. These circumstances include significant adverse changes in projected revenues or expenses, underperformance relative to historical or projected operating results, or negative industry or economic trends. A recoverability test is also performed when management plans to sell or dispose of an asset group.
To evaluate recoverability, Americas Best Value Inn compares the carrying value of the asset group to the future net undiscounted cash flows expected to be generated by the asset group. If this comparison indicates that the carrying value is not recoverable, the company recognizes an impairment loss. This loss is calculated as the excess of the carrying value over the estimated fair value of the asset group.
When an impairment loss is recognized for assets that will continue to be held and used, Americas Best Value Inn depreciates the adjusted carrying amount of these assets over their remaining useful life. This process ensures that the value of the assets reflected on the company's balance sheet accurately represents their expected future economic benefit.