Under what circumstances does Cicis test for goodwill impairment?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
Goodwill and intangible assets: The Company has elected the accounting alternative provided in Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill, which allows a private company to elect an accounting alternative for the subsequent measurement of goodwill. The ASU allows goodwill to be amortized on a straight-line basis over the estimated useful life with a maximum life of 10 years. Pursuant to this accounting alternative, the Company tests for goodwill impairment upon the occurrence of an event or circumstance that may indicate the fair value of the Company is less than its carrying amount and has elected to perform this test at the Company level. If events or circumstances are present that may indicate the fair value of the Company is less than its carrying value, the estimated fair value of the Company is compared to its carrying amount and an impairment loss is recognized for the excess of the carrying amount over the fair value (if any), not to exceed the carrying amount of goodwill. No indicators of impairment were identified during 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, Cicis tests for goodwill impairment when certain events or circumstances suggest that the company's fair value might be less than its carrying amount. Cicis has elected an accounting alternative that allows goodwill to be amortized on a straight-line basis over a maximum of 10 years. This election means that instead of annual impairment tests, Cicis only performs these tests if specific triggers are present. The test is conducted at the company level.
If these triggering events or circumstances occur, Cicis compares its estimated fair value to its carrying amount. Should the carrying amount exceed the fair value, Cicis recognizes an impairment loss. This loss is capped at the carrying amount of the goodwill.
For prospective franchisees, this accounting practice indicates that Cicis monitors its financial health and the value of its assets. The FDD states that no indicators of impairment were identified during the years ended December 31, 2024 and 2023. This provides some assurance that the company's goodwill was not impaired during those periods.