At what level are assets grouped for identifiable cash flows at Budget?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
We review long-lived assets for impairment when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. Assets are grouped at the lowest level of identifiable cash flows. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, when assessing long-lived assets for impairment, assets are grouped at the lowest level of identifiable cash flows. This means that Budget evaluates its assets not as a whole, but by breaking them down into smaller units that generate independent cash flows.
For a prospective Budget franchisee, this is relevant because it indicates how the company monitors the performance of its assets. By grouping assets at the lowest level of identifiable cash flows, Budget can more accurately determine if an asset's carrying value (the value on the balance sheet) exceeds its fair value (the actual market value). This process helps Budget identify potential losses and adjust its financial statements accordingly.
The FDD also mentions that the auditors evaluate management's determination of asset groups at the lowest level of identifiable cash flows. This suggests that the way Budget groups its assets for impairment testing is a critical area of scrutiny, ensuring that the company's financial reporting is accurate and reliable. Franchisees can take comfort in knowing that Budget's asset valuation practices are subject to thorough review and oversight.
This approach to asset grouping and impairment assessment is a standard accounting practice, but its specific application can vary depending on the nature of the business and the assets involved. For Budget, with its significant investment in vehicles and other long-lived assets, this process is particularly important for maintaining financial stability and transparency.