Under what circumstances does Benjamin Franklin Plumbing test goodwill for impairment?
Benjamin_Franklin_Plumbing Franchise · 2025 FDDAnswer from 2025 FDD Document
luding specifically identified intangible assets. Commencing on January 1, 2023, the Company adopted the private company alternative accounting approach for the subsequent accounting for goodwill as provided for in ASU 2014-02, Intangibles - Goodwill and Other (Topic 350): Accounting for Goodwill. As such, the Company amortizes goodwill on a straight-line basis over a period of ten years. The accounting alternative requires the Company to make an accounting policy decision to test goodwill for impairment at either the entity level or the reporting unit level. The Company tests goodwill for impairment at the entity level.
In accordance with ASU 2021-03 - "Accounting Alternative for Evaluating Triggering Events," the Company tests goodwill for impairment if the facts and circumstances at year end indicate a triggering event exists. In conducting impairment testing, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If the Company performs a qualitative assessment and determines that the carrying value more likely than not exceeds the fair value, then the quantitative impairment test is performed, otherwise no further analysis is required. The Company also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. The ultimate outcome of the goodwill impairment assessment will be the same whether the Company chooses to perform the qualitative assessment or proceed directly to the quantitative impairment test.
The Company did not identify any triggering events as of December 31, 2024 and 2023 and did not recognize any impairment charges for the years ended December 31, 2024, 2023 and 2022.
Member's Equity
The Company has one class of units.
Source: Item 22 — CONTRACTS (FDD pages 87–88)
What This Means (2025 FDD)
According to the 2025 FDD, Benjamin Franklin Plumbing tests goodwill for impairment if facts and circumstances at the end of the year indicate a triggering event exists. Goodwill, in this context, represents the excess of acquisition costs over the fair value of acquired assets and liabilities, including specifically identified intangible assets.
Benjamin Franklin Plumbing adopted a private company alternative accounting approach for goodwill, starting January 1, 2023, and amortizes goodwill on a straight-line basis over ten years. The company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If the company performs a qualitative assessment and determines that the carrying value more likely than not exceeds the fair value, then the quantitative impairment test is performed, otherwise no further analysis is required. The company also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. The ultimate outcome of the goodwill impairment assessment will be the same whether the Company chooses to perform the qualitative assessment or proceed directly to the quantitative impairment test.
For a prospective Benjamin Franklin Plumbing franchisee, this means that the franchisor periodically evaluates the value of its goodwill to ensure it is not overstated on its financial statements. This process can affect the franchisor's reported financial health, which indirectly impacts franchisees. Understanding the franchisor's accounting practices, including goodwill impairment testing, helps franchisees assess the financial stability of the franchise system.