What are some indicators that Checkersrallys considers when evaluating potential impairment of indefinite-lived intangible assets?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company assesses the impairment of indefinite-lived intangible assets, which consist of brand name intangibles, on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The annual impairment assessment is performed on the first day of the Company's fourth fiscal quarter. When evaluating potential impairment indicators, we consider the following:
- Significant under-performance relative to expected and/or historical results (negative same store sales growth or operating cash flows)
- Significant industry or economic trends that could have a negative impact on our business
The impairment evaluation typically involves utilizing market conditions and future discounted cash flows, which are based on forecasted operating results. If it is determined that the estimated fair value of the intangible asset is less than its carrying value, we record an impairment loss to adjust the asset carrying value to fair value.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the company assesses the impairment of indefinite-lived intangible assets, such as brand name intangibles, annually or when events suggest the carrying value may not be recoverable. The annual assessment occurs on the first day of Checkersrallys's fourth fiscal quarter.
When evaluating potential impairment indicators, Checkersrallys considers significant under-performance relative to expected or historical results. This includes negative same-store sales growth or operating cash flows. The company also considers significant industry or economic trends that could negatively impact their business.
The impairment evaluation typically involves analyzing market conditions and future discounted cash flows, which are based on forecasted operating results. If the estimated fair value of the intangible asset is less than its carrying value, Checkersrallys records an impairment loss to adjust the asset's carrying value to its fair value. This process involves significant assumptions, including estimates of future revenues, discount rates, and royalty rates, all of which can impact the financial statements of Checkersrallys.