When is impairment present for Chocolate Bash's long-lived assets?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is present when the sum of the undiscounted estimated future cash flows expected to result from use of the assets is less than carrying value. If impairment is present, the carrying value of the impaired asset is reduced to its fair value. As of December 31, 2023, December 31, 2022, & December 31, 2021, no impairment loss has been recognized for long-lived assets.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 38)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, impairment of long-lived assets is assessed when events or circumstances suggest that the carrying value of those assets may not be fully recoverable. Specifically, impairment exists when the total of the undiscounted estimated future cash flows expected from using the assets is less than their carrying value.
If such impairment is present, Chocolate Bash will reduce the carrying value of the impaired asset to its fair value. However, as of December 31, 2023, December 31, 2022, and December 31, 2021, Chocolate Bash has not recognized any impairment loss for its long-lived assets.
This accounting practice is standard across industries. Prospective Chocolate Bash franchisees should understand that the franchisor regularly evaluates its assets and adjusts their value if their expected future cash flows diminish significantly. This ensures that the financial statements accurately reflect the true value of Chocolate Bash's assets.