What factors would necessitate an impairment assessment of long-lived assets for Christian Brothers Automotive?
Christian_Brothers_Automotive Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company reviews the carrying value of long-lived assets to be used in operations whenever events or changes in circumstances (triggering event) indicate that the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset, or a significant decline in the observable market value of an asset, among others.
If such factors indicate a potential impairment, the Company will assess the recoverability of an asset by determining if the carrying amount of the asset exceeds its estimated undiscounted net cash flow, excluding interest. Any impairment would be measured as the difference between the asset's carrying amount and its estimated fair value. For the years ended December 31, 2023 and 2022, there were no triggering events.
Source: Item 23 — RECEIPTS (FDD pages 76–372)
What This Means (2025 FDD)
According to Christian Brothers Automotive's 2025 Franchise Disclosure Document, the company reviews the carrying value of long-lived assets used in operations when events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. These events are referred to as 'triggering events'.
Factors that would trigger an impairment assessment for Christian Brothers Automotive include a significant adverse change in the extent or manner in which an asset is used. This could mean the equipment is not being utilized as much as initially planned, or it is being used in a way that reduces its value. Another trigger is a significant adverse change in legal factors or the business climate that could affect the value of the asset. This could include new regulations that make the asset less valuable or changes in the local economy that reduce its profitability. Finally, a significant decline in the observable market value of an asset would also necessitate an impairment assessment.
If any of these factors indicate a potential impairment, Christian Brothers Automotive will assess the recoverability of the asset. This assessment involves determining if the carrying amount of the asset exceeds its estimated undiscounted net cash flow, excluding interest. If the carrying amount is higher, it suggests that the asset is overvalued on the company's books. Any impairment is measured as the difference between the asset's carrying amount and its estimated fair value, which represents the actual loss in value recognized by the company.
For the years ended December 31, 2023 and 2022, the document states that there were no triggering events that would have required such an assessment. This indicates that, at least for those years, the company did not experience any significant adverse changes that would have negatively impacted the value of its long-lived assets.