What controls over management's identification of events or changes in circumstances that indicate that the carrying amount of vehicles may not be recoverable were tested for Budget?

According to Budget's 2025 Franchise Disclosure Document, the effectiveness of controls over specific management practices was tested. These practices relate to identifying events or changes in circumstances that suggest the carrying amount of Budget's vehicles might not be recoverable. The controls tested included management's review of forecasted future cash flows related to the vehicles. Additionally, the audit included tests of management's review of the methodology used to determine the fair value estimate of the vehicles.

These tests are crucial for ensuring the accuracy of Budget's financial statements. If the carrying amount of vehicles is not recoverable, it means the vehicles are overvalued on the balance sheet, which could mislead investors and franchisees. By testing these controls, auditors can gain confidence that Budget is properly assessing the value of its vehicle assets and recognizing any necessary impairments.

For a prospective Budget franchisee, this information indicates the level of scrutiny and due diligence applied to Budget's financial reporting. Understanding that the company's vehicle valuation methods are regularly reviewed and tested can provide some reassurance about the financial health and transparency of the organization. Franchisees rely on the accuracy of the franchisor's financial statements to make informed decisions about their investment.

It's important to note that the FDD excerpt describes the audit procedures performed by an independent auditor. While these procedures provide a level of assurance, they do not guarantee that the financial statements are completely free of error. Franchisees should still conduct their own due diligence and consult with financial advisors to fully understand the risks and opportunities associated with investing in a Budget franchise.