Under what condition does Gold Star evaluate goodwill for impairment?
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, Gold Star has adopted an accounting alternative for measuring goodwill. Instead of regular evaluations, Gold Star only evaluates goodwill for impairment when a triggering event occurs. A triggering event would be a significant change in the business environment that suggests the goodwill's value may be diminished. During the years ended December 31, 2024, 2023 and 2022, no triggering event occurred requiring impairment testing, and therefore no impairment loss was recorded.
Goodwill is an intangible asset representing the value of a business's brand name, customer relationships, intellectual property, and other factors that allow it to generate more revenue than its tangible assets would suggest. Goodwill, net of accumulated amortization, was reported as $381,667 for Gold Star Chili, Inc. and $67,719 for TCWW, LLC as of December 31, 2024. The company amortizes goodwill on a straight-line basis over ten years. Future amortization expense of $57,930 per year is expected through December 2030, $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.
For a prospective franchisee, this accounting practice means that the financial health of Gold Star is assessed for goodwill impairment only when specific, significant events indicate a potential problem. This approach is less frequent than annual testing but is considered acceptable under accounting standards. Franchisees should be aware of the potential for goodwill impairment, as it could affect the company's reported assets and overall financial position. Understanding the conditions that could trigger an impairment evaluation can provide franchisees with insight into potential risks and opportunities associated with the franchise.