How did the audit evaluate Benihana's evaluation of impairment indicators?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
Our audit procedures related to the evaluation of long-lived asset impairment indicators included the following, among others:
- We tested the effectiveness of internal controls over the Company's long lived asset impairment indicator evaluation.
- We evaluated the reasonableness of the Company's evaluation of impairment indicators by:
- Testing long-lived restaurant assets for possible indications of impairment, including searching for locations with current period losses or projected losses
- Performing inquiries of management regarding the process and assumptions used to identify potential indicators of impairment and evaluating the consistency of the assumptions with evidence obtained in other areas of the audit
- Inspecting minutes of the board of directors, the Company's public statements, operating plans, and industry data to identify any evidence that may contradict management's assumptions
- We tested the completeness and accuracy of the underlying source information used by management to identify quantitative indicators of impairment.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the audit procedures related to the evaluation of long-lived asset impairment indicators included several steps. The auditors tested the effectiveness of internal controls over the company's evaluation process. They also evaluated the reasonableness of the company's assessment of impairment indicators.
To evaluate reasonableness, the auditors tested long-lived restaurant assets for possible indications of impairment, specifically looking for locations with current or projected losses. They made inquiries of management regarding the processes and assumptions used to identify potential indicators, ensuring consistency with other audit evidence. Additionally, they inspected minutes from the board of directors, public statements, operating plans, and industry data to identify any contradictions to management's assumptions.
Finally, the auditors tested the completeness and accuracy of the underlying source information used by management to identify quantitative indicators of impairment. This comprehensive approach suggests a thorough review of Benihana's processes for identifying potential impairments of its long-lived assets.