Under what circumstances are Jack In The Box's non-financial instruments assessed for impairment?
Jack_In_The_Box Franchise · 2025 FDDAnswer from 2025 FDD Document
Non-financial assets and liabilities — Our non-financial instruments, which primarily consist of property and equipment, operating lease right-of-use assets, goodwill, and intangible assets, are reported at carrying value and are not required to be measured at fair value on a recurring basis. However, on an annual basis, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable, non-financial instruments are assessed for impairment. If applicable, the carrying values are written down to fair value.
In connection with our impairment reviews performed during 2024, the Company impaired certain assets. For further information, see Note 4, Summary of Refranchisings and Assets Held For Sale, Note 5, Goodwill and Intangible Assets, Net, and Note 9, Other Operating Expenses, Net in the notes to the consolidated financial statements.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 93–94)
What This Means (2025 FDD)
According to Jack In The Box's 2025 Franchise Disclosure Document, the company assesses its non-financial instruments for impairment on an annual basis or whenever events or changes in circumstances suggest that the carrying value of these assets may not be recoverable. These non-financial instruments primarily consist of property and equipment, operating lease right-of-use assets, goodwill, and intangible assets. The carrying value is then written down to fair value if applicable.
This means that Jack In The Box periodically reviews the value of its physical assets, lease-related assets, and intangible assets like brand reputation. This is a standard accounting practice to ensure that the company's financial statements accurately reflect the true value of its assets. If there's a significant event, such as a decline in market conditions or a specific operational issue, that indicates an asset's value has decreased, Jack In The Box will perform an impairment assessment sooner than the annual review.
For a prospective franchisee, this indicates that Jack In The Box is diligent in monitoring the value of its assets and adjusting its financial statements accordingly. The 2025 FDD mentions that impairment reviews were performed during 2024, and the company impaired certain assets. More information can be found in Note 4, Summary of Refranchisings and Assets Held For Sale, Note 5, Goodwill and Intangible Assets, Net, and Note 9, Other Operating Expenses, Net in the notes to the consolidated financial statements.
It is important to note that these non-financial instruments are reported at carrying value and are not required to be measured at fair value on a recurring basis.