How does Craters & Freighters determine potential impairment of its long-lived assets?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company reviews their long-lived assets periodically to determine potential impairment by comparing the carrying value of those assets with the estimated future undiscounted cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future undiscounted cash flows be less than the carrying value, the Company would recognize an impairment loss at that time. No impairment loss was recognized in 2024 and 2023.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to Craters & Freighters' 2025 Franchise Disclosure Document, the company periodically reviews its long-lived assets to assess potential impairment. This involves comparing the carrying value of these assets with the estimated future undiscounted cash flows expected from their use, including any cash flows from disposition.
If the total of these expected future undiscounted cash flows is less than the carrying value of the asset, Craters & Freighters would recognize an impairment loss at that time. This means the company would reduce the recorded value of the asset on its balance sheet to reflect its diminished value.
The FDD indicates that no impairment loss was recognized in 2024 and 2023. This suggests that, at least for those years, the estimated future cash flows from the company's long-lived assets were sufficient to cover their carrying values. This process is important for franchisees to understand as it affects the overall financial health and reported value of Craters & Freighters' assets, which can impact the franchisor's ability to support its franchisees.