Under what circumstances will Exit test its goodwill (or a reporting unit's goodwill) for impairment?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
In accordance with update 2014-02 to the FASB Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other, the Company has elected to apply the accounting alternative for goodwill. The accounting alternative allows an entity to take goodwill relating to each business combination or reorganization event resulting in fresh-start reporting (amortizable unit of goodwill) and amortize it on a straight-line basis over ten years, or less than ten years if the Company demonstrates that another useful life is more appropriate. Goodwill of the Company (or a reporting unit) shall be tested for impairment if an event occurs, or circumstances change that indicates the fair value of the Company (or the reporting entity) may be below its carrying amount.
The Company has recorded goodwill associated with the acquisition of Legacy Success Group, LLC on January 1, 2018. During the year ended December 31, 2020, the Company assigned an additional $6,250 to goodwill in relation to the purchase agreement. The goodwill is associated with Legacy Success Group, LLC's reputation within its respective industry, totaling $24,973. The Company began to amortize it over a ten-year period effective January 1, 2018. Management has determined that there has been no impairment related to this goodwill for the years ended December 31, 2024, 2023, and 2022. Amortization expense totaled $2,914 for the years ended December 31, 2024, 2023, and 2022, respectively.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the company will test its goodwill (or a reporting unit's goodwill) for impairment if an event occurs or circumstances change. These events or changes must indicate that the fair value of Exit (or the reporting entity) may be below its carrying amount.
Exit has elected to apply an accounting alternative for goodwill, allowing them to amortize goodwill relating to each business combination or reorganization event resulting in fresh-start reporting on a straight-line basis over ten years, unless they can demonstrate that another useful life is more appropriate. The company recorded goodwill associated with the acquisition of Legacy Success Group, LLC on January 1, 2018, and assigned an additional $6,250 to goodwill during the year ended December 31, 2020.
This goodwill, totaling $24,973, is associated with Legacy Success Group, LLC's reputation within its industry. Exit began amortizing this goodwill over a ten-year period starting January 1, 2018. As of December 31, 2024, 2023, and 2022, management determined that there was no impairment related to this goodwill. The amortization expense totaled $2,914 for each of those years.