Under what circumstances are Del Taco's non-financial instruments assessed for impairment, and what happens if impairment is indicated?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Non-financial assets and liabilities — The Company's non-financial instruments, which primarily consist of property and equipment, operating lease right-of-use assets, goodwill and intangible assets, are reported at carrying value and are not required to be measured at fair value on a recurring basis. However, on an annual basis, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable, non-financial instruments are assessed for impairment. If applicable, the carrying values are written down to fair value.
In connection with our impairment reviews performed during 2025 and 2024, the Company impaired certain Del Taco assets. For further information, see Note 3, Summary of Refranchisings and Assets Held For Sale, Note 5, Goodwill and Intangible Assets, Net, and Note 8, Other Operating Expenses, Net in the notes to the condensed consolidated financial statements.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, the company's non-financial instruments, such as property, equipment, operating lease right-of-use assets, goodwill, and intangible assets, are assessed for impairment on an annual basis. Additionally, these instruments are assessed whenever events or changes in circumstances suggest that their carrying value may not be recoverable. This means that if there are any significant negative changes impacting these assets, Del Taco will evaluate whether their recorded value on the balance sheet still makes sense.
If impairment is indicated, the carrying values of these non-financial instruments are written down to fair value. This means that the asset's value on the company's books is reduced to reflect its current market value or estimated worth. For example, if Del Taco owns equipment that becomes obsolete or declines in value due to market conditions, the company would recognize an impairment charge to reduce the asset's book value to its fair value.
In both 2025 and 2024, Del Taco performed impairment reviews and impaired certain assets. Further details about these impairments can be found in the notes to the condensed consolidated financial statements, specifically in Note 3 (Summary of Refranchisings and Assets Held For Sale), Note 5 (Goodwill and Intangible Assets, Net), and Note 8 (Other Operating Expenses, Net). These notes would provide more specific information on the nature and amounts of the impairments, offering a deeper understanding of the financial implications for Del Taco.