Under what circumstances does Buildingstars test goodwill for impairment?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
Goodwill is the excess of an acquired business over the fair value amounts assigned to identifiable assets acquired and liabilities assumed. The Company has elected to amortize goodwill on a straightline basis over 10 years and to test goodwill for impairment at the reporting unit level. Goodwill is tested for impairment when a triggering event occurs that indicates the fair value of an entity (or reporting unit) may be below its carrying amount.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 34–43)
What This Means (2025 FDD)
According to Buildingstars' 2025 Franchise Disclosure Document, goodwill, which represents the excess of an acquired business's cost over the fair value of its identifiable assets and liabilities, is tested for impairment at the reporting unit level. Buildingstars has elected to amortize goodwill on a straight-line basis over 10 years.
The key factor that triggers an impairment test for Buildingstars is the occurrence of a triggering event. This event suggests that the fair value of an entity or reporting unit within Buildingstars may have fallen below its carrying amount.
In practical terms, this means that if there are significant negative changes, such as a major economic downturn, loss of a key client, or a significant decline in the performance of a particular Buildingstars franchise location, the company will need to assess whether the goodwill associated with that part of the business has been impaired. If the fair value is indeed lower than the carrying amount, Buildingstars will need to recognize an impairment loss, which would negatively impact its financial statements.