How are acquisition costs treated by Bojangles during business combinations?
Bojangles Franchise · 2025 FDDAnswer from 2025 FDD Document
We account for business combinations using the acquisition method. As of the acquisition date, the acquirer recognizes, separately from goodwill, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. Goodwill is initially measured at cost, being the excess of the cost of acquisition over the fair value of the net identifiable assets acquired and liabilities assumed. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any noncontrolling interest in the acquiree. If the cost of acquisition is lower than the fair value of the net identifiable assets, the difference is recognized in profit or loss. Acquisition costs are expensed as incurred.
Source: Item 22 — CONTRACTS (FDD page 82)
What This Means (2025 FDD)
According to Bojangles's 2025 Franchise Disclosure Document, the company uses the acquisition method to account for business combinations. When Bojangles acquires another business, it recognizes the identifiable assets, liabilities, and any noncontrolling interest separately from goodwill as of the acquisition date. Goodwill is initially measured at cost, which is the excess of the acquisition cost over the fair value of the net identifiable assets acquired and liabilities assumed. The cost of acquisition includes the consideration transferred, measured at fair value on the acquisition date, and the amount of any noncontrolling interest. If the acquisition cost is lower than the fair value of the net identifiable assets, the difference is recognized as a profit or loss.
For a prospective Bojangles franchisee, this accounting treatment is important because it affects how the company reports its financial performance and the value of its assets. Specifically, the FDD states that acquisition costs are expensed as incurred. This means that Bojangles does not capitalize these costs as part of the acquired assets but instead recognizes them as expenses in the period they are incurred, which can impact the company's profitability in the short term.
This approach is a standard accounting practice, providing transparency in financial reporting. Franchisees can review Bojangles's financial statements to understand how acquisitions impact the company's financial health. Understanding these accounting policies can help franchisees assess the financial stability and growth strategy of Bojangles.