Under what circumstances is Bojangles' property, plant, and equipment subject to fair value adjustments?
Bojangles Franchise · 2025 FDDAnswer from 2025 FDD Document
Property, plant and equipment: Fair value measurements are based on Level 3 inputs, including appraisals or sales prices of comparable assets and estimates of future cash flows. Property, plant and equipment is measured at fair value on a nonrecurring basis and is subject to fair value adjustments only in certain circumstances, for example, when there is evidence of impairment. Impairment charges are measured based on the amount by which the carrying amount of these assets exceeds their fair value. If the Company concludes that impairment exists, the carrying amount is reduced to fair value.
Source: Item 22 — CONTRACTS (FDD page 82)
What This Means (2025 FDD)
According to Bojangles's 2025 Franchise Disclosure Document, the fair value of property, plant, and equipment is assessed on a nonrecurring basis and adjusted only when specific conditions are met. These assets are subject to fair value adjustments when there is evidence of impairment.
Specifically, impairment charges are determined by calculating the difference between the carrying amount of the assets and their fair value. If the carrying amount exceeds the fair value, the company will reduce the carrying amount to reflect the fair value.
Fair value measurements are based on Level 3 inputs, which include appraisals, sales prices of comparable assets, and estimates of future cash flows. This indicates that Bojangles relies on professional judgment and market data to determine fair value when impairment is suspected. This approach is consistent with standard accounting practices, ensuring that assets are not overstated on the company's balance sheet.