How is an impairment loss measured for a Golden Krust Caribbean Restaurant's long-lived asset?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
Long-lived assets, such as property and equipment and ROU operating assets, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the long-lived asset (or asset group) exceeds its fair value and the carrying amount is not recoverable, an impairment loss is recognized. An impairment loss is measured as the amount by which the long-lived asset (or asset group) exceeds its fair value. Fair value is determined through various valuation techniques including undiscounted cash flow models, quoted fair values and third-party independent appraisals.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to the 2024 Franchise Disclosure Document, Golden Krust Caribbean Restaurant reviews long-lived assets like property, equipment, and ROU (Right-of-Use) operating assets for impairment when circumstances suggest that the asset's carrying amount may not be recoverable.
If the carrying amount of the long-lived asset exceeds its fair value and is deemed unrecoverable, Golden Krust Caribbean Restaurant recognizes an impairment loss. The impairment loss is specifically measured as the difference between the asset's carrying amount and its fair value.
The fair value of the asset is determined through various valuation techniques. These techniques include undiscounted cash flow models, quoted fair values, and third-party independent appraisals. This means that Golden Krust Caribbean Restaurant uses a range of methods to assess the true worth of the asset when evaluating potential impairment.