What accounting alternative does Gold Star use for the subsequent measurement of goodwill?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
ent for purposes of computing depreciation are:
| Buildings | 15 – 39 Years |
|---|---|
| Leasehold Improvements | 15 – 39 Years |
| Furniture and Equipment | 3 – 15 Years |
| Vehicles | 5 Years |
Long-Lived Assets
Long-lived assets to be held and used are tested for recoverability whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are measured based on the fair value of the asset, and long-lived assets to be disposed of by sale are reported at the lower of the carrying amount or fair value less costs to sell. Long-lived assets were measured for impairment, and no adjustments were deemed necessary during any of the years ended December 31, 2024, 2023 and 2022.
Goodwill Accounting Alternative
The Comp
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the company has adopted an accounting alternative for the subsequent measurement of goodwill as provided in FASB ASC 350-20. This means that instead of evaluating goodwill for impairment frequently, Gold Star amortizes it on a straight-line basis over a period of ten years. An impairment evaluation is only conducted if a triggering event occurs.
For a prospective Gold Star franchisee, this accounting method has implications for understanding the company's financial statements. As of December 31, 2024, 2023, and 2022, the goodwill is reported net of accumulated amortization of $129,914, $74,727, and $27,721 respectively. This amortization reduces the reported value of goodwill on Gold Star's balance sheets over time.
The FDD indicates that future amortization expense is expected to be $57,930 per year through December 2030, then $49,930 for the year ending December 2031, $30,209 for the year ending December 2032, $16,667 for the year ending December 2033, and $5,000 for the year ending December 2034. This consistent amortization schedule provides a predictable expense that franchisees may see reflected in Gold Star's financial performance.
It is important to note that this approach differs from the standard impairment testing, which could result in larger, less predictable charges if the value of goodwill were to decline significantly. However, under Gold Star's chosen method, the goodwill is only evaluated for impairment upon a triggering event, which could delay the recognition of any potential impairment losses. During the years ended December 31, 2024, 2023 and 2022, no triggering event occurred requiring impairment testing, and as such, no impairment loss was recorded.