What topic does ASU 2021-03 address concerning Body Brain Center's accounting practices?
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, ASU 2021-03 addresses the accounting alternative for evaluating triggering events related to goodwill. Specifically, it provides private companies and not-for-profit entities with an 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.
For a Body Brain Center franchisee, this means that the company has elected an alternative method for assessing whether the value of its goodwill has been impaired. Instead of continuously monitoring for triggering events during the reporting period, Body Brain Center 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 election impacts how Body Brain Center accounts for goodwill, which represents the excess of the amount paid by the company over the book value of assets purchased for a direct center. By adopting this alternative, Body Brain Center is not required to monitor for impairment triggering events throughout the year, potentially reducing the frequency of impairment tests. The company adopted this alternative to evaluating goodwill effective January 1, 2022.