Under what circumstances would Golden Krust Caribbean Restaurant adjust its goodwill value?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
cash flow models, quoted fair values and third-party independent appraisals.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Goodwill
The Company adopted the alternative method of accounting for goodwill which allows it to amortize goodwill on a straight-line basis over a period of ten years. Goodwill continues to be evaluated and adjusted if events and circumstances indicate that a permanent decline in value below the current unamortized historical cost has occurred. The Company tests goodwill impairment at the entity level. As of December 31, 2023 and 2022, the Company concluded that there was no
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to Golden Krust Caribbean Restaurant's 2024 Franchise Disclosure Document, the company uses an alternative method for accounting goodwill, amortizing it on a straight-line basis over ten years. However, this goodwill is not static.
Golden Krust Caribbean Restaurant will evaluate the goodwill and make adjustments if certain events or changes in circumstances suggest that there has been a permanent decline in its value below the current unamortized historical cost. The company conducts these impairment tests at the entity level, meaning they assess the overall goodwill of the company rather than specific components.
As of December 31, 2023 and 2022, Golden Krust Caribbean Restaurant determined that no goodwill impairment had occurred. The goodwill on the company's books is related to a business reorganization that took place on January 1, 2019. The amortization expense for goodwill was $32,748 for both the years ending December 31, 2023 and 2022.