When does Bumble Roofing test for impairment of goodwill annually?
Bumble_Roofing Franchise · 2025 FDDAnswer from 2025 FDD Document
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 the 2025 FDD, Bumble Roofing assesses the impairment of goodwill annually as of September 30th. Goodwill, an intangible asset, is tested for impairment using a fair value approach. This means Bumble Roofing determines if the fair value of its reporting unit (the overall value of the franchise system) is less than its carrying value (the value recorded on the balance sheet).
If the fair value is less than the carrying value, or if the fair value of the goodwill has decreased, Bumble Roofing would record an impairment loss to reflect this difference. This adjustment ensures that the financial statements accurately represent the value of the company's assets. In addition to the annual test, Bumble Roofing will also test 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.
For a prospective Bumble Roofing franchisee, this annual assessment of goodwill impairment is important because it reflects the financial health and stability of the franchise system. Impairment charges can negatively impact the company's profitability and overall financial condition. However, the FDD states that management believed there had been no impairment of intangible assets during 2024, 2023, or 2022.
Understanding how Bumble Roofing values and assesses its intangible assets, including goodwill, can provide valuable insights into the franchisor's financial management practices. Franchisees should monitor the company's financial performance and any significant events that could trigger an impairment test to assess the overall risk and stability of their investment.