How does Crowne Plaza measure impairment to be recognized if long-lived assets are considered impaired?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company evaluates property and equipment and other long-lived assets for recoverability when changes in circumstances indicate the carrying value may not be recoverable; for example, when there are material adverse changes in projected revenues or expenses, significant underperformance relative to historical or projected operating results, and significant negative industry or economic trends. If indicators of impairment are present, estimated undiscounted future cash flows from related operations are compared with the current carrying values of the long-lived assets. If these assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Fair value is based on estimated discounted future cash flows.
Source: Item 23 — Receipts (FDD pages 100–424)
What This Means (2025 FDD)
According to Crowne Plaza's 2025 Franchise Disclosure Document, the company evaluates property, equipment, and other long-lived assets for recoverability when circumstances suggest that their carrying value may not be recoverable. Such circumstances include material adverse changes in projected revenues or expenses, significant underperformance relative to historical or projected operating results, and significant negative industry or economic trends.
If these indicators of impairment are present, Crowne Plaza compares the estimated undiscounted future cash flows from related operations with the current carrying values of the long-lived assets. If the assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value.
The fair value is determined based on estimated discounted future cash flows. This means that Crowne Plaza assesses the potential future revenue that the asset is expected to generate, discounts it to its present value, and compares it to the asset's current book value. If the book value is higher, an impairment loss is recognized to reduce the asset's value to its fair value. This accounting practice ensures that the value of assets reported on Crowne Plaza's balance sheet reflects their true economic worth.