How often does Carvel evaluate goodwill and tradenames for impairment?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
Intangible assets consist primarily of goodwill, tradenames, reacquired franchise rights, and franchise agreements. The Company does not amortize goodwill or tradenames. Goodwill and tradenames are evaluated for impairment using a qualitative or quantitative assessment annually at year-end, or more frequently when circumstances arise indicating potential impairment.
Goodwill and tradenames for each of the subsidiaries which are franchisors and operators of the Company SBRs (the "reporting units") are evaluated for impairment. If a qualitative assessment is performed and the fair value of a reporting unit's net assets or tradename more likely than not exceeds the carrying value of the reporting unit's net assets or tradename, respectively, no further evaluation is necessary. If a quantitative assessment is performed and the fair value of a reporting unit or tradename exceeds the carrying value of the reporting unit's net assets or tradename, respectively, the goodwill or tradename is not impaired. If the carrying value of the reporting unit's net assets or tradename exceeds the fair value of the reporting unit or tradename, respectively, an impairment charge is recorded for the difference.
The Company estimates fair value using multiple valuation methodologies, including discounted cash flow models. The operating assumptions used in the discounted cash flow models are generally consistent with past performance and with the projections and assumptions that are used in the Company's current operating plan. Such assumptions are subject to change as a result of changing economic and competitive conditions.
No impairment losses were recorded for goodwill, tradenames, or amortizable intangible assets during the fiscal years ended December 29, 2024 and December 31, 2023.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, the company evaluates goodwill and tradenames for impairment annually at year-end. However, Carvel may perform these evaluations more frequently if circumstances indicate a potential impairment.
The evaluation involves either a qualitative or quantitative assessment. If a qualitative assessment shows that the fair value of the reporting unit's net assets or tradename likely exceeds its carrying value, no further evaluation is needed. If a quantitative assessment is used and the fair value exceeds the carrying value, the goodwill or tradename is not considered impaired. Conversely, if the carrying value exceeds the fair value, Carvel records an impairment charge for the difference.
Carvel estimates fair value using various valuation methods, including discounted cash flow models. The assumptions used in these models are generally consistent with past performance and the company's current operating plan. These assumptions can change due to economic and competitive conditions. The FDD states that no impairment losses were recorded for goodwill, tradenames, or amortizable intangible assets during the fiscal years ended December 29, 2024, and December 31, 2023.