What qualitative factors are considered when Management Recruiters assesses goodwill impairment?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
When evaluating goodwill for impairment, we have the option to first assess qualitative factors to determine whether it is more likely than not the fair value of a reporting unit is less than its carrying value. Qualitative factors include macroeconomic conditions, industry and market conditions, and overall company financial performance. If, after assessing these events and circumstances, we determine that it is more likely than not the fair value of the reporting unit is greater than its carrying amount, a quantitative impairment test is not necessary. We also have the option to bypass the qualitative assessment and proceed directly to performing the quantitative impairment test. If completed, the quantitative impairment test involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair value exceeds the carrying value, no impairment of goodwill is deemed necessary. If the carrying value of the reporting unit exceeds its fair value, we recognize an impairment loss in an amount equal to the excess, up to the carrying value of the goodwill.
Based on our annual assessment, we have concluded that it is more likely than not the fair value of our reporting unit exceeds its carrying value and our goodwill was not impaired.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 65–66)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, when evaluating goodwill for impairment, Management Recruiters has the option to first assess qualitative factors to determine whether it is more likely than not the fair value of a reporting unit is less than its carrying value. These qualitative factors include macroeconomic conditions, industry and market conditions, and overall company financial performance. If, after assessing these events and circumstances, Management Recruiters determines that it is more likely than not the fair value of the reporting unit is greater than its carrying amount, a quantitative impairment test is not necessary.
Management Recruiters also has the option to bypass the qualitative assessment and proceed directly to performing the quantitative impairment test. If completed, the quantitative impairment test involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit.
If the fair value exceeds the carrying value, no impairment of goodwill is deemed necessary. If the carrying value of the reporting unit exceeds its fair value, Management Recruiters will recognize an impairment loss in an amount equal to the excess, up to the carrying value of the goodwill. Based on their annual assessment, Management Recruiters has concluded that it is more likely than not the fair value of their reporting unit is greater than its carrying value and their goodwill was not impaired.