How did Bumble Roofing determine the fair values of franchise agreements, software, trademarks, and goodwill?
Bumble_Roofing Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company's franchise agreements, certain internally developed software, trademarks, and goodwill were assigned fair values based upon appraisals obtained as part of the recapitalizations that occurred in previous years various business acquisitions further discussed in Note 7.
Additionally, the Company capitalizes certain costs incurred in connection with developing or obtaining internaluse software. Capitalized costs include direct external costs, internal payroll, and payroll-related costs for employees who are directly associated with and devote time to the project. Costs incurred during the preliminary project stage, as well as costs for maintenance and training, are expensed as incurred. Capitalization begins when the preliminary project stage is complete, management authorizes and commits to funding the project, it is probable that the project will be completed, and the software will be used for its intended function. Capitalization ceases when the project is substantially complete and ready for its intended use.
The value associated with the franchise agreements, internally developed software, and trademarks are being amortized on a straight-line basis over 5-15 years.
The Company periodically evaluates whether changes have occurred that would require revision of the remaining estimated useful life of the franchise agreements, trademarks, and internally developed software as well as whether changes have occurred to determine if all intangible assets are recoverable.
Goodwill is not amortized, but is tested for impairment using a fair value approach. If the fair value of the reporting unit is less than its carrying value, or if the fair value of the goodwill has been diminished, an impairment loss would be recorded to the extent of that difference. The Company tests for impairment as of September 30 annually. Goodwill will be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value or diminish the fair value of the goodwill. Management believes there has been no impairment of intangible assets during 2024, 2023, or 2022.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 53)
What This Means (2025 FDD)
According to Bumble Roofing's 2025 Franchise Disclosure Document, the company assigned fair values to its franchise agreements, internally developed software, trademarks, and goodwill based on appraisals obtained during recapitalizations in previous years and various business acquisitions. These intangible assets are crucial for Bumble Roofing's operations and brand identity. The values are determined by professional appraisals to ensure accuracy and compliance with accounting standards.
Bumble Roofing amortizes the value of franchise agreements, internally developed software, and trademarks using the straight-line method over a period of 5 to 15 years. This means the cost of these assets is spread evenly over their estimated useful lives. The company also evaluates these assets periodically to determine if any changes require a revision of their estimated useful life or if the assets are recoverable. This ensures that the recorded values remain accurate and reflect the current market conditions and the asset's performance.
Goodwill, on the other hand, is not amortized but is tested for impairment annually using a fair value approach. If the fair value of the reporting unit is less than its carrying value, or if the fair value of the goodwill has diminished, an impairment loss is recorded. Bumble Roofing tests for impairment as of September 30 each year and may conduct additional tests if events or circumstances change that could reduce the fair value of a reporting unit below its carrying value. Management believed there was no impairment of intangible assets during 2024, 2023, or 2022.