How does Kitchen Solvers recognize impairment losses on long-lived assets that are to be held and used?
Kitchen_Solvers Franchise · 2025 FDDAnswer from 2025 FDD Document
GAAP requires that long-lived assets be reviewed for impairment when events or circumstances indicate the carrying value of an asset may not be recoverable. Long-lived assets to be held and used are reviewed for impairment 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 recognized based on fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value, less estimated cost to sell. As of December 31, 2024, there have been no such losses incurred by the Company.
Source: Item 21 — Financial Statements (FDD pages 48–49)
What This Means (2025 FDD)
According to Kitchen Solvers' 2025 Franchise Disclosure Document, the company reviews long-lived assets for impairment when events or changes in circumstances suggest that the asset's carrying amount may not be recoverable. This is a standard accounting practice under Generally Accepted Accounting Principles (GAAP). For assets that Kitchen Solvers intends to continue holding and using, impairment losses are recognized based on the fair value of the asset.
In simpler terms, if something happens that makes Kitchen Solvers believe an asset is worth less than what's on their books, they assess the asset's fair value. If the fair value is lower, they record a loss to reflect the reduced value. This ensures that the financial statements accurately represent the company's financial position.
The FDD states that as of December 31, 2024, Kitchen Solvers had not incurred any such losses. This indicates that, at least up to that point, the company believed the value of its long-lived assets was accurately reflected in its financial statements. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value, less estimated cost to sell.