What is involved in the quantitative assessment of goodwill performed by Americas Best Value Inn?
Americas_Best_Value_Inn Franchise · 2025 FDDAnswer from 2025 FDD Document
Goodwill is not amortized, and we test goodwill for impairment each year or more frequently should facts and circumstances indicate that it is more likely than not that the fair value is less than the carrying amount. As part of the impairment test, we may elect to perform an assessment of qualitative factors. If this qualitative assessment indicates that it is more likely than not that the fair value, including goodwill, is less than its carrying amount, or if we elect to bypass the qualitative assessment, we would then proceed with a quantitative assessment. The quantitative assessment involves calculating an estimated fair value based on projected future cash flows, and comparing the estimated fair value to the carrying amount, including goodwill. If the estimated fair value exceeds carrying value, including goodwill, no impairment is recognized. However, if the carrying amount, including
goodwill, exceeds fair value, an impairment loss is recognized in an amount equal to the excess, limited to the total goodwill balance.
We have not recognized any impairment on goodwill during the years ended December 31, 2024, 2023, and 2022.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 70–71)
What This Means (2025 FDD)
According to the 2025 FDD, Americas Best Value Inn assesses goodwill for impairment annually or more frequently if circumstances suggest the fair value is less than the carrying amount. As part of this assessment, Americas Best Value Inn may choose to perform a qualitative assessment.
If the qualitative assessment indicates that the fair value, including goodwill, is likely less than its carrying amount, or if Americas Best Value Inn chooses to skip the qualitative assessment, a quantitative assessment is conducted. This quantitative assessment involves calculating an estimated fair value based on projected future cash flows.
The estimated fair value is then compared to the carrying amount, including goodwill. If the estimated fair value exceeds the carrying value, no impairment is recognized. However, if the carrying amount exceeds the estimated fair value, an impairment loss is recognized. The loss is equal to the excess of the carrying amount over the fair value, but it is limited to the total goodwill balance. No impairment on goodwill was recognized for the years ended December 31, 2024, 2023, and 2022.