Under what circumstances does Epcon Communities review the carrying value of long-lived assets for impairment?
Epcon_Communities Franchise · 2025 FDDAnswer from 2025 FDD Document
The carrying value of long-lived assets is reviewed for impairment whenever events or changes in circumstances indicate the amount of the assets may not be recoverable. When an indication of impairment is present and the undiscounted cash flows estimated to be generated by the related assets are less than the assets' carrying amount, an impairment loss will be recorded based on the difference between the carrying amount of the assets and their estimated fair value. There were no such impairment adjustments during 2024 and 2023.
Source: Item 23 — RECEIPTS (FDD pages 86–280)
What This Means (2025 FDD)
According to Epcon Communities' 2025 Franchise Disclosure Document, the company reviews the carrying value of its long-lived assets for impairment under specific circumstances. This review is triggered whenever events occur or there are changes in circumstances that suggest the recorded value of these assets may not be recoverable.
If such indicators are present, Epcon Communities estimates the undiscounted cash flows expected to be generated by the assets. Should these anticipated cash flows fall below the asset's carrying amount, the company will then recognize an impairment loss. This loss is calculated as the difference between the asset's carrying amount and its estimated fair value.
For a prospective franchisee, this accounting practice indicates that Epcon Communities is diligent in assessing the real value of its assets. The 2025 FDD states that there were no impairment adjustments during 2024 and 2023. This suggests that the assets have maintained their value during those periods. Franchisees may want to inquire about the specific types of events or changes in circumstances that would trigger an impairment review to better understand potential risks to asset values.