Under what circumstances does Bath Tune Up review the carrying amount of its long-lived assets?

According to Bath Tune Up's 2025 Franchise Disclosure Document, the company reviews the carrying amount of its long-lived assets when specific events or circumstances suggest that the current carrying amount of these assets may not be recoverable. This indicates that Bath Tune Up proactively monitors its assets and their values, and it is not just done during year-end audits.

If such a review is triggered and the carrying amount is deemed unrecoverable, Bath Tune Up will record an impairment charge. This charge accounts for the difference between the asset's carrying amount and its fair value. The fair value is determined by assessing the discounted projected future operating cash flows over the asset's remaining service life, using a risk-adjusted discount rate that reflects the inherent risks.

For a prospective Bath Tune Up franchisee, this accounting practice means that the franchisor is diligent about accurately valuing its assets. This can impact the franchisee indirectly, as it affects the overall financial health and reporting of the company. Understanding these accounting practices can provide franchisees with insight into how the franchisor manages its financial responsibilities and assets.

It's important for potential franchisees to understand that impairment charges can affect the company's profitability, which in turn could influence decisions related to franchisee support, marketing, and other services. Therefore, understanding the franchisor's asset management and accounting practices is a useful part of due diligence.