When does Big Apple Bagels conduct its annual impairment test for goodwill and intangible assets?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
Following the guidelines contained in ASC 350, the Company tests goodwill and intangible assets that are not subject to amortization for impairment annually or more frequently if events or circumstances indicate that impairment is possible. The Company has elected to conduct its annual test during the first quarter. During the quarters ended February 28, 2024, 2023 and 2022, management qualitatively assessed goodwill to determine whether testing was necessary. Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy, and changes in the composition and carrying amounts of net assets. If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than it's carrying value, a quantitative assessment is then performed.
Source: Item 23 — RECEIPTS (FDD pages 87–319)
What This Means (2025 FDD)
According to the 2025 Big Apple Bagels FDD, the company conducts its annual impairment test for goodwill and intangible assets during the first quarter of its fiscal year. This aligns with accounting standards that require companies to assess these assets for impairment at least annually.
Big Apple Bagels' management also performs a qualitative assessment to determine if a quantitative test is necessary. This assessment considers factors such as macroeconomic conditions, industry and market considerations, the company's financial performance, changes in management and strategy, and changes in the composition and carrying amounts of net assets. If the qualitative assessment indicates that the fair value of a reporting unit is likely less than its carrying value, a quantitative assessment is then performed.
For a prospective Big Apple Bagels franchisee, this means that the franchisor regularly evaluates the value of its intangible assets, including goodwill. While this doesn't directly impact the franchisee's day-to-day operations, it provides insight into the franchisor's financial management practices and the overall health of the Big Apple Bagels brand. Understanding how the franchisor manages its assets can be a useful factor in evaluating the stability and long-term potential of the franchise system.