When did Carls perform its annual goodwill impairment test for fiscal year 2023?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
We perform our annual goodwill impairment test on the last day of the first accounting period in our fiscal fourth quarter, which was December 5, 2022 for fiscal 2023. In accordance with authoritative guidance, we first assess qualitative factors to determine whether it is more likely than not that the fair values of our reporting units are less than their carrying amounts. If we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we then conduct a single-step quantitative goodwill impairment test, consisting of a comparison of the fair values of the reporting units to the carrying values of the reporting units. If the carrying value of a reporting unit exceeds its fair value, then an impairment charge will be recognized for the amount by which the carrying value exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to that reporting unit.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the company performed its annual goodwill impairment test on December 5, 2022, for fiscal year 2023. Carls assesses qualitative factors to determine if the fair values of its reporting units are less than their carrying amounts.
If Carls concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, they conduct a single-step quantitative goodwill impairment test. This test compares the fair values of the reporting units to their carrying values.
If the carrying value of a reporting unit exceeds its fair value, Carls will recognize an impairment charge. This charge is for the amount by which the carrying value exceeds the reporting unit's fair value, but it cannot exceed the total amount of goodwill allocated to that reporting unit. This process helps Carls determine if the value of its goodwill has decreased and requires adjustment on its financial statements.