How are impairment losses on long-lived assets held for sale determined by Dq Treat?
Dq_Treat Franchise · 2025 FDDAnswer from 2025 FDD Document
Recoverability of Long-Lived Assets—The Company reviews the recoverability of long-lived assets, such as property and equipment, for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable. The Company determines potential impairment by comparing the carrying value of the assets with the net undiscounted cash flows expected to be provided by operating activities of the business or related products. If the sum of the expected future net undiscounted cash flows is less than the carrying value, the Company determines whether an impairment loss should be recognized. An impairment loss is measured by comparing the amount by which the carrying value exceeds the fair value of the assets. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced for the cost to dispose of the assets. The measurement of impairment requires the Company to estimate future cash flows and the fair value of long-lived assets. The Company did not record any long-lived asset impairments for the years ended December 31, 2024, 2023, and 2022.
Source: Item 17 — The following paragraph is added to the end of Item 17 of the Disclosure Document: (FDD pages 70–378)
What This Means (2025 FDD)
According to Dq Treat's 2025 Franchise Disclosure Document, the company reviews the recoverability of long-lived assets, such as property and equipment, for impairment whenever events or changes in circumstances suggest that the carrying value of an asset may not be recoverable. Dq Treat determines potential impairment by comparing the carrying value of the assets with the net undiscounted cash flows expected from the business's operating activities. If the expected future net undiscounted cash flows are less than the carrying value, Dq Treat determines whether an impairment loss should be recognized.
An impairment loss is measured by comparing the amount by which the carrying value exceeds the fair value of the assets. For long-lived assets held for sale, impairment losses are determined similarly, but the fair values are reduced by the cost to dispose of the assets. This measurement requires Dq Treat to estimate future cash flows and the fair value of long-lived assets.
The FDD states that Dq Treat did not record any long-lived asset impairments for the years ended December 31, 2024, 2023, and 2022. This indicates that, at least recently, Dq Treat has not faced situations where the value of its assets has significantly declined below their carrying value. For a prospective franchisee, understanding these accounting practices is important for assessing the financial health and stability of Dq Treat.