How is the impairment loss calculated for a long-lived asset at Crave Cookies?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset are less than the carrying amount of the asset, the asset cost is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value.
No asset impairment was recognized during the years ended December 31, 2023 or 2022.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the company assesses the recoverability of long-lived assets whenever events or circumstances suggest that the carrying amount of these assets may not be recoverable. This evaluation is crucial for maintaining an accurate representation of the company's financial health.
If the assessment indicates that the undiscounted estimated future cash flows expected from the use and eventual disposition of the asset are less than its carrying amount, Crave Cookies will adjust the asset's cost to its fair value. This adjustment reflects the true economic value of the asset.
An impairment loss is then recognized. This loss is calculated as the difference between the carrying amount of the long-lived asset and its fair value. Essentially, if an asset's book value exceeds its actual worth, the company writes down the asset to its fair value and records the corresponding loss. The 2025 FDD states that no asset impairment was recognized during the years ended December 31, 2023 or 2022.