When did Body Brain Center adopt the alternative to evaluating goodwill?
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 alternative method for evaluating goodwill effective January 1, 2022. This alternative accounting method allows Body Brain Center to evaluate goodwill impairment triggering events at the end of each reporting period, rather than monitoring for these events throughout the period.
This change means that Body Brain Center is not required to constantly monitor for events that might trigger a goodwill impairment assessment during the year. Instead, they only need to perform a comprehensive evaluation at the end of each reporting period (either interim or annual). If, at the end of the period, facts and circumstances suggest a triggering event, Body Brain Center must then determine if it is more likely than not that the goodwill is impaired.
For a prospective Body Brain Center franchisee, this accounting policy primarily affects the franchisor's financial reporting. It doesn't directly impact the franchisee's day-to-day operations. However, understanding the franchisor's accounting practices can provide insight into their financial management and overall stability. Franchisees may want to discuss with Body Brain Center the implications of this accounting change on the company's financial statements and how it affects their assessment of the company's financial health.
The Financial Accounting Standards Board (FASB) issued ASU 2021-03 to provide private companies and not-for-profit entities with this accounting alternative. This allows Body Brain Center to simplify its accounting processes related to goodwill impairment. This election could reduce the administrative burden and costs associated with continuous monitoring, potentially freeing up resources for other business activities.