How does Cicis determine the fair value of a long-lived asset when assessing impairment?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
Asset impairment assessments: The Company periodically evaluates the carrying value of long-lived assets to be held and used at the asset group level including, but not limited to, capital assets and intangible assets, when events and circumstances warrant such a review. The carrying value of a longlived asset is considered impaired when the anticipated undiscounted cash flow from such asset is less than its carrying value. In that event, a loss would be recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value would be determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose. There were no such impairment losses recognized for the years ended December 31, 2024 and 2023.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 58–64)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, the company periodically assesses the carrying value of its long-lived assets, including capital and intangible assets. This review occurs when events or circumstances suggest a potential need. The company considers an asset impaired if its anticipated undiscounted cash flow is less than its carrying value.
In such cases, Cicis recognizes a loss based on the difference between the asset's carrying value and its fair value. The fair value is primarily determined by discounting anticipated cash flows at a rate that reflects the associated risks. For assets slated for disposal, fair values are further reduced by the costs associated with the disposal.
The FDD states that no impairment losses were recognized for the years ended December 31, 2024 and 2023. This accounting practice is important for prospective franchisees to understand, as it affects the company's reported financial performance and the value of its assets. Understanding how Cicis values its assets can give a franchisee insight into the financial stability of the company.