How often does Crowne Plaza test goodwill and intangible assets with indefinite lives for impairment?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
Goodwill and intangible assets with indefinite lives (trademarks) are not amortized but are tested for impairment at least annually and whenever events or circumstances occur to indicate that these intangible assets may be impaired.
Goodwill is assessed using a quantitative test, with any goodwill impairment recorded at the amount by which the reporting unit's carrying value exceeds its fair value and not to exceed the total amount of goodwill allocated to the reporting unit.
The Company evaluates the carrying value of intangible assets with indefinite lives for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the carrying amount exceeds the fair value, an impairment loss is recognized in the consolidated statements of net income to the amount of the difference.
Source: Item 23 — Receipts (FDD pages 100–424)
What This Means (2025 FDD)
According to Crowne Plaza's 2025 Franchise Disclosure Document, goodwill and intangible assets with indefinite lives, such as trademarks, are not amortized. Instead, Crowne Plaza tests them for impairment at least annually. Additionally, these assets are tested whenever events or circumstances suggest that they may be impaired.
The purpose of these tests is to ensure that the recorded value of these assets on Crowne Plaza's balance sheet accurately reflects their fair value. If the carrying amount of an intangible asset exceeds its fair value, Crowne Plaza recognizes an impairment loss in its consolidated statements of net income to account for the difference.
For a Crowne Plaza franchisee, this accounting practice is important because it affects the financial statements of the franchisor. Regular impairment testing provides transparency regarding the value of key assets like the Crowne Plaza trademark. Franchisees benefit from a financially sound franchisor, as it indicates stability and the ability to support the franchise system. Furthermore, the FDD states that the company uses a quantitative test to assess goodwill, which means that the company uses a mathematical calculation to determine if the goodwill is impaired. This can give franchisees confidence that the company is using a rigorous and objective process to assess the value of its goodwill.