What method does Bft use to determine the estimated fair value of trademarks for impairment testing?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
o write-offs of uncollectible amounts during the year ended December 31, 2024. As of December 31, 2023, no allowance for expected credit losses was recorded.
Property and equipment, net – Property and equipment includes software and digital platform and are carried at cost less accumulated depreciation. Depreciation is recognized on a straight-line method, based on the following estimated useful lives:
Software and digital platform 3-5 years
Software and digital platform consist primarily of costs associated with web development projects. The Company capitalizes eligible costs to acquire, develop, or modify digital platforms that are incurred subsequent to the preliminary project stage. Depreciation of these assets begins upon the initial usage of the digital platforms.
The cost and accumulated depreciation of assets sold or retired are removed from the accounts and any gain or loss is included in the results of operations during the period of sale or disposal.
Intangible assets – Intangible assets consist of indefinite and definitive-lived trademarks and web design and domains.
The Company tests for impairment of trademarks with an indefinite life annually or sooner whenever events or circumstances indicate that trademarks might be impaired. The Company first assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the trademarks is less than the carrying amount. In the absence of sufficient qualitative factors, trademark impairment is determined utilizing a two-step analysis. The two-step analysis involves comparing the fair value to the carrying value of the trademarks.
Source: Item 23 — RECEIPTS (FDD pages 79–265)
What This Means (2025 FDD)
According to Bft's 2025 Franchise Disclosure Document, the company tests for impairment of trademarks with an indefinite life annually or sooner if events or circumstances suggest the trademarks might be impaired. Bft first assesses qualitative factors to determine if these events or circumstances indicate that the fair value of the trademarks is likely less than the carrying amount.
If qualitative factors are insufficient, Bft uses a two-step analysis to determine trademark impairment, comparing the fair value to the carrying value of the trademarks. The company determines the estimated fair value using a relief from royalty approach. If the carrying amount exceeds the fair value, Bft impairs the trademarks to their fair value.
For example, the document mentions that trademark impairments of $251 and $0 were recorded for the periods ended December 31, 2024 and 2023, respectively. Additionally, the company determined that the carrying value of the CycleBar trademark intangible asset was in excess of its fair value and recognized an impairment loss of $251 during the year ended December 31, 2024. The remaining CycleBar trademark intangible asset of $9,649 is considered to be at a heightened risk of future impairment in the event of significant unfavorable changes in assumptions.