Did Budget recognize any impairment to goodwill for the year ended December 31, 2024?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
other intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Other intangible assets with finite lives are amortized over their estimated useful lives and are evaluated each reporting period to determine if circumstances warrant a revision to these lives.
During our annual impairment assessment performed as of October 1, 2024, we determined that the carrying value of our Zipcar trademark, which is an unamortized intangible asset included within our Americas reportable segment, exceeded its fair value. We determined the fair value of the Zipcar trademark using the relief-from-royalty method (Level 3), which is a form of the income approach. This method applies a royalty rate to projected income to quantify the benefit of owning the intangible asset rather than paying a royalty for use of the asset. The significant assumptions used in the assessment of the fair value of the trademark included future revenues, a discount rate and a royalty rate. As a result, we recognized an impairment of $28 million within long-lived asset
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, Budget assesses goodwill for impairment at least annually. The assessment is performed in the fourth quarter of each year at the reporting unit level. Budget assesses goodwill for impairment by comparing the carrying value of each reporting unit to its fair value using the present value of expected future cash flows. When appropriate, comparative market multiples and other factors are used to corroborate the discounted cash flow results.
For the year ended December 31, 2024, Budget determined that the carrying value of its Zipcar trademark exceeded its fair value, resulting in an impairment of $28 million. This impairment was recognized within long-lived asset impairment and other related charges in the Consolidated Statement of Operations. The fair value of the Zipcar trademark was determined using the relief-from-royalty method, which is a form of the income approach. The significant assumptions used in the assessment of the fair value of the trademark included future revenues, a discount rate and a royalty rate.
However, Budget states that there was no impairment to goodwill for the year ended December 31, 2024. Additionally, there were no impairments to goodwill or other intangible assets during the years ended December 31, 2023 or 2022. This indicates that while Budget did recognize an impairment related to its Zipcar trademark, the company's goodwill was not impaired during the specified period.