When does Browns Chicken conduct its annual impairment evaluation of goodwill?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations. Goodwill and indefinite-lived intangible assets are not amortized but are reviewed at least annually for impairment and whenever there is an impairment indicator, using a fair-value based approach. The Company conducts its annual impairment evaluation in the fourth quarter of each year. No impairment was indicated for the years ended December 31, 2024 and 2023. The recoverability of goodwill is measured using a two-step process. Step one of the test compared the fair value of each reporting unit to its book value. Step two, which compares the book value of the goodwill to its implied fair value, was not necessary since there were no indicators of potential impairment from step one.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 42)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, the company conducts its annual impairment evaluation of goodwill in the fourth quarter of each year. Goodwill, representing the excess of cost over the fair value of net assets acquired in business combinations, along with indefinite-lived intangible assets, are not amortized. Instead, they undergo review at least annually for impairment, utilizing a fair-value based approach.
The FDD states that for the years ended December 31, 2024 and 2023, no impairment was indicated. The process for measuring the recoverability of goodwill involves two steps. The first step compares the fair value of each reporting unit to its book value. The second step, which compares the book value of the goodwill to its implied fair value, was deemed unnecessary because the initial step showed no indicators of potential impairment.
For a prospective Browns Chicken franchisee, this means that the goodwill of the company is evaluated annually to ensure its value is accurately reflected in the financial statements. The evaluation occurs in the fourth quarter, providing a regular checkpoint for assessing the company's financial health. The two-step process ensures a thorough review, although the second step is only triggered if the first step indicates potential issues. This rigorous approach to goodwill assessment can provide franchisees with confidence in the financial stability and transparency of Browns Chicken.