How does Bw Premier Collection value other intangible assets?
Bw_Premier_Collection Franchise · 2025 FDDAnswer from 2025 FDD Document
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November 30, 2024
The total purchase price was allocated based upon: (i) the amounts reported in the WH historical financial statements for any assets that were reported at fair value in accordance with WH's historical accounting policies, and (ii) management's estimates of fair value. The Company determined estimated fair value for other intangible assets with the assistance of valuations performed by third-party specialists. Other intangible assets of acquired customers and trademarks and trade names were valued at $2.1 million and $1.3 million, respectively. To the extent the consideration exceeded the fair value of the net assets acquired in this transaction, the excess was assigned to goodwill.
As of August 31, 2024 and 2023, quantitative analyses of goodwill and other intangible asset impairment were performed. To estimate the fair value of goodwill for the reporting unit, the Company utilized a combination of income-based and market-based approaches. The income-based approach utilized a discounted cash flow analysis which considered future growth and profitability. Significant inputs included the discount rate and the terminal growth rate. The market-based approach considered comparable businesses' quoted market prices and market multiples, and a control premium. No impairment was recorded for the years ended November 30, 2024 and 2023. To estimate the fair value of the indefinitelived trademarks and trade name, the Company utilized an income-based approach, specifically the relief-from-royalty approach. Significant inputs included revenue growth, royalty rate, and discount rate. No impairment was recorded for the years ended November 30, 2024 and 2023.
AutoClerk
On July 31, 2019, the Company entered into and closed a definitive Share Sale and Purchase Agreement with the shareholders of AutoClerk, Inc. ("AC"), to purchase 100% of the outstanding shares of AC. The AC acquisition was accounted for as a business combination in accordance with ASC Topic 805, Business Combinations.
The total purchase price was allocated based upon: (i) the amounts reported in the AC historical financial statements for any assets that were reported at fair value in accordance with AC's historical accounting policies, and (ii) management's estimates of fair value. The Company determined estimated fair value for other intangible assets with the assistance of valuations performed by third-party specialists. Other intangible assets of developed technology and acquired customers were valued at $1.9 million and $1.5 million, respectively. To the extent the consideration exceeded the fair value of the net assets acquired in this transaction, the excess was assigned to goodwill.
Source: Item 23 — Receipts (FDD pages 54–203)
What This Means (2025 FDD)
According to Bw Premier Collection's 2025 Franchise Disclosure Document, the company values other intangible assets, such as acquired customers, developed technologies, trademarks, and trade names, based on their acquisition date fair values. These values are determined with assistance from third-party specialists. The document specifies that acquired customers and trademarks/trade names were valued at $2.1 million and $1.3 million, respectively, in one instance. Developed technology and acquired customers were valued at $1.9 million and $1.5 million, respectively, in another instance.
Bw Premier Collection amortizes these intangible assets using the straight-line method over their estimated useful lives, which range from 7.5 to 10 years, with the exception of trademarks and trade names, which are considered indefinite-lived and not subject to amortization. The amortization expense for definite-life intangible assets was approximately $0.4 million for both the years ended November 30, 2024, and 2023, and is estimated to remain around $0.4 million annually for the fiscal years ending 2025 and 2026.
Bw Premier Collection also assesses these assets for impairment annually, using qualitative and quantitative tests. The qualitative assessment determines if it's likely that the asset's fair value is less than its carrying amount. If so, a quantitative impairment test is performed. The fair value of intangible assets is determined using income and market methods. If the carrying value exceeds the fair value, an impairment charge is recognized for the excess. For indefinite-lived trademarks and trade names, the company uses an income-based approach, specifically the relief-from-royalty approach, considering factors like revenue growth, royalty rate, and discount rate.
For a potential Bw Premier Collection franchisee, understanding how intangible assets are valued and amortized is crucial because it affects the company's financial statements and overall financial health. The consistent amortization expense of $0.4 million for definite-life intangible assets provides a degree of predictability. The fact that trademarks and trade names are not amortized, coupled with regular impairment testing, suggests that Bw Premier Collection is actively monitoring the value of its brand and intellectual property. Franchisees should be aware of these accounting practices as they evaluate the financial stability and long-term prospects of the franchise.