Over what period does Chesters amortize goodwill using the straight-line method?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company has adopted the accounting alternative that permits nonpublic entities to elect to amortize goodwill on a straight-line basis over ten years. Goodwill is assigned to specific reporting units and is reviewed for possible impairment annually or more frequently if events or circumstances indicated that a reporting unit's carrying amount is greater than its fair value. An impairment loss is recognized to the extent the carrying amount of goodwill exceeds its estimated fair value. There were no impairment charges recorded in years 2024 and 2023.
Source: Item 21 — **FINANCIAL STATEMENTS (FDD page 48)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, the company amortizes goodwill on a straight-line basis over a period of ten years. This accounting practice is applied because Chesters has elected to use the accounting alternative available to nonpublic entities. Goodwill is assigned to specific reporting units within the company.
Chesters reviews its goodwill annually, or more frequently, if there are indications that the carrying amount of a reporting unit exceeds its fair value. If the carrying amount of goodwill exceeds its estimated fair value, an impairment loss is recognized.
For a prospective franchisee, this accounting practice itself has no direct financial impact. However, it provides insight into how Chesters manages and accounts for its assets, which can be useful for assessing the financial health and stability of the franchisor. Understanding the amortization period and the process for impairment review can help franchisees gauge the long-term value and risk associated with the Chesters brand.