What test is required if Checkers deems impairment of indefinite-lived intangible assets to be more likely than not?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
If impairment is deemed to be more likely than not, a quantitative test is required that compares the fair value of the Company with its carrying amount. If the carrying amount exceeds fair value, that amount represents the impairment loss to be recognized.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, if the company determines that impairment of indefinite-lived intangible assets is more likely than not, a quantitative test is required. This test involves comparing the fair value of the company with its carrying amount.
If the carrying amount exceeds the fair value, the difference represents the impairment loss that must be recognized. This process is part of how Checkers assesses the value of its tradename and brand-related intangible assets, which are not subject to amortization.
For a prospective Checkers franchisee, this means that the financial stability and brand strength of the company are regularly evaluated. If the brand's value decreases significantly, it could lead to the recognition of an impairment loss, which might reflect underlying business challenges. Understanding these evaluations can provide insights into the overall health and potential risks associated with investing in a Checkers franchise.