What accounting alternative did Body Brain Center adopt effective January 1, 2022?
Body_Brain_Center Franchise · 2025 FDDAnswer from 2025 FDD Document
In March 2021, the FASB issued ASU 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events. The amendments in this update provide private companies and not-for-profit entities with an accounting alternative to perform the goodwill impairment triggering event evaluation as required in Subtopic 350-20 as of the end of the reporting period, whether the reporting period is an interim or annual period. An entity that elects this alternative is not required to monitor for goodwill impairment triggering events during the reporting period but, instead, should evaluate the facts and circumstances as of the end of each reporting period to determine whether a triggering event exists and, if so, whether it is more likely than not that goodwill is impaired. An entity that does not elect the accounting alternative for amortizing goodwill and that performs its annual impairment test as of a date other than the annual reporting date should perform a triggering event evaluation only as of the end of the reporting period. The Company adopted this alternative to evaluating goodwill effective January 1, 2022.
Source: Item 23 — RECEIPT (FDD pages 43–178)
What This Means (2025 FDD)
According to Body Brain Center's 2025 Franchise Disclosure Document, the company adopted an accounting alternative for evaluating triggering events related to goodwill, effective January 1, 2022. This alternative, as outlined in FASB ASU 2021-03, allows private companies and not-for-profit entities to perform the goodwill impairment triggering event evaluation at the end of the reporting period, whether interim or annual.
By electing this alternative, Body Brain Center is not required to continuously monitor for goodwill impairment triggering events during the reporting period. Instead, the company evaluates the facts and circumstances at the end of each reporting period to determine if a triggering event exists and whether it is more likely than not that goodwill is impaired.
This accounting change affects how Body Brain Center assesses the value of its goodwill, which represents the excess of the amount paid over the book value of assets purchased for a direct center. Instead of continuous monitoring, Body Brain Center now performs this evaluation at the end of each reporting period. This may reduce the administrative burden of constant monitoring but requires a thorough evaluation at each reporting period's end.