How does Bojangles account for business combinations?
Bojangles Franchise · 2025 FDDAnswer from 2025 FDD Document
Indefinite-lived intangible assets acquired in a business combination are recorded at fair value as of the acquisition date and primarily consist of the Bojangles brand (the "Brand"). The Company accounts for the Brand under ASC 350, Intangibles – Goodwill and Other, which requires that indefinite-lived intangible assets are not amortized but tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.
The Company performs its annual impairment review of the Brand at December 1, first using the qualitative assessment then quantitative assessment if impairment is determined to be more likely than not. A quantitative assessment is performed by comparing the carrying value of the Brand to the estimated fair value of the Brand. An impairment occurs if the carrying amount of the Brand exceeds the estimated fair value. No qualitative impairment indicators were identified for the Brand in the Company's 2024, 2023 or 2022 assessments.
(dollars in thousands)
The Company has determined that no triggering event existed during the years ended December 29, 2024, December 31, 2023 and December 25, 2022, and further impairment evaluation is not required.
Goodwill and Other Intangibles, Net—Definite-Lived
Definite-lived intangible assets acquired in a business combination are recorded at fair value as of the acquisition date and primarily consist of goodwill and franchise rights. Goodwill represents the excess of the consideration paid for businesses acquired by the Company over the fair value of the identifiable net assets at the dates of acquisitions. The Company follows the accounting alternative documented in Accounting Standards Update ("ASU") 2014-02, Intangibles-Goodwill and Other (Topic 350) to account for goodwill. Goodwill is amortized on a straight-line basis over 10 years. Franchise rights represent the ability to generate a specific earnings stream associated exclusively with the Company's franchise agreements. Franchise rights are amortized on a straight-line basis over the weighted average life of 30 years based on the franchise agreements.
Source: Item 22 — CONTRACTS (FDD page 82)
What This Means (2025 FDD)
According to Bojangles's 2025 Franchise Disclosure Document, the company records indefinite-lived intangible assets, such as the Bojangles brand, acquired in a business combination at fair value as of the acquisition date. Bojangles accounts for the brand under ASC 350, Intangibles – Goodwill and Other, which means they do not amortize the asset but test it for impairment at least annually, or more frequently if circumstances indicate potential impairment. The annual impairment review occurs on December 1st, starting with a qualitative assessment and proceeding to a quantitative assessment if impairment is deemed likely. An impairment is recognized if the carrying amount of the brand exceeds its estimated fair value. No qualitative impairment indicators were identified in the 2024, 2023, or 2022 assessments.
Definite-lived intangible assets, such as goodwill and franchise rights, acquired in a business combination are also recorded at fair value as of the acquisition date. Goodwill represents the excess of the purchase price over the fair value of identifiable net assets. Bojangles amortizes goodwill on a straight-line basis over 10 years, following Accounting Standards Update (ASU) 2014-02. Franchise rights, representing the earnings stream from franchise agreements, are amortized on a straight-line basis over a weighted average life of 30 years, based on the franchise agreements.
For a prospective franchisee, this accounting treatment is important because it affects how Bojangles values its assets and reports its financial performance. Understanding how the brand and other intangible assets are valued and amortized can provide insights into the financial health and stability of the company. The impairment tests ensure that the value of the brand is regularly assessed, which can impact the company's reported earnings and financial position. The amortization of goodwill and franchise rights also affects the company's expenses and profitability over time.