How does Engel & Volkers amortize its intangible assets?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company's intangible assets principally consist of a master franchise license acquired in an asset acquisition using the cost accumulation model. In a cost accumulation model, the cost of the acquisition is allocated to the asset acquired on the basis of relative fair value of such asset. The intangible assets are amortized on a straight-line basis over their estimated economic useful lives, which for the master franchise license represents the remaining contractual period of the contract in which the right was initially granted, determined to be 19 years.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, the company amortizes its intangible assets using the straight-line method over their estimated economic useful lives. For the master franchise license, this period is determined to be 19 years, representing the remaining contractual period of the contract in which the right was initially granted. This means that the cost of the intangible assets is evenly distributed over this 19-year period for accounting purposes.
For prospective Engel & Volkers franchisees, understanding the amortization of intangible assets is crucial for interpreting the company's financial statements. Amortization is a non-cash expense that reflects the reduction in value of intangible assets over time. In Engel & Volkers' case, the consistent amortization expense of $608,883 for the years 2022, 2023 and 2024 indicates a steady and predictable expense related to these assets.
The FDD also provides an estimated amortization schedule for the next five years and thereafter. This information can help franchisees understand the future financial impact of these intangible assets on Engel & Volkers' financial performance. Additionally, Engel & Volkers reviews long-lived assets, including intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If impairment is indicated, the carrying amounts of the related long-lived assets are adjusted to fair value.