According to Buildingstars' asset impairment assessments, how is impairment recognized?

According to Buildingstars' 2025 Franchise Disclosure Document, the company reviews long-lived assets for impairment whenever events or circumstances suggest that the carrying value of those assets may not be fully recoverable. Impairment is recognized when the sum of undiscounted estimated future cash flows expected from the use of the assets is less than their carrying value.

If such impairment is recognized, Buildingstars will reduce the carrying value of the impaired asset to its fair value. This means that the asset's book value on the company's balance sheet will be adjusted to reflect its current market value, recognizing a loss if the fair value is lower than the original carrying value.

For a prospective Buildingstars franchisee, understanding these accounting policies is crucial for interpreting the company's financial statements. Asset impairment can signal underlying issues with the performance or value of certain assets, which could impact the overall financial health of Buildingstars. Franchisees should consider these factors when evaluating the financial stability and future prospects of the franchise system.