Under what circumstances does Bonchon review long-lived assets, including right of use assets, for potential impairment?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
ction with developing the software, are capitalized. As of December 31, 2024 and 2023, $2,102,759 and $2,025,179 of software development costs were capitalized, respectively,
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Software development costs (continued)
and are included in "Property and equipment, net" in the accompanying balance sheets.
Property and equipment
Property and equipment are carried at cost, less accumulated depreciation and amortization. Expenditures for maintenance and repairs are expensed currently, while renewals and betterments that materially extend the life of an
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, Bonchon reviews long-lived assets that are subject to amortization, including right of use assets, for potential impairment. This review occurs whenever events or circumstances indicate that the carrying amounts of these assets may not be recoverable.
In 2023 and 2022, Bonchon determined that the carrying amount of its software exceeded its fair value by $48,311 and $63,854, respectively. As a result, Bonchon recognized an impairment loss of those amounts, which was included in "Impairment loss on software" in the statements of income and changes in member's equity. However, no impairment loss was recognized during the year ended December 31, 2024.
For a prospective Bonchon franchisee, this means that the value of assets like software, equipment, and leasehold improvements are periodically assessed to ensure they reflect their actual worth. If an asset's value decreases significantly due to certain events or circumstances, Bonchon will recognize an impairment loss, which can affect the company's financial statements. This is a standard accounting practice to ensure that assets are not overstated on the balance sheet.