Under what circumstances does Deka Lash review the carrying values of property and equipment for impairment?

According to Deka Lash's 2024 Franchise Disclosure Document, Deka Lash reviews the carrying values of property and equipment for impairment when certain conditions are met. Specifically, Deka Lash conducts this review "whenever events or circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition." If Deka Lash considers the asset impaired, the company recognizes an impairment loss to the extent that the carrying value exceeds the fair value of the asset.

For a prospective franchisee, this means that Deka Lash assesses the value of its assets regularly to ensure they are accurately reflected on its balance sheets. If an event suggests that an asset's carrying value (the value at which it is recorded) might not be recoverable through future use or sale, Deka Lash will review it for impairment. This process is important for maintaining an accurate financial picture of the company.

The FDD states that no impairment was recognized during the years ended December 31, 2023, 2022, or 2021. This indicates that, at least in recent years, Deka Lash has not had to write down the value of its property and equipment due to impairment. This could be a positive sign for potential franchisees, suggesting that Deka Lash's assets are generally well-maintained and retain their value. However, it is important to remember that past performance is not necessarily indicative of future results, and circumstances could change that lead to impairment in the future.

It is standard accounting practice to review assets for impairment. This ensures that a company's financial statements accurately reflect the true value of its assets. For a franchisee, understanding these accounting practices can provide insight into the financial health and stability of the franchise system.