How often does Moes Southwest Grill evaluate goodwill and tradenames for impairment?
Moes_Southwest_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
Intangible assets consist primarily of goodwill, tradenames, reacquired franchise rights, and franchise agreements. The Company does not amortize goodwill or tradenames. Goodwill and tradenames are evaluated for impairment using a qualitative or quantitative assessment annually at year-end, or more frequently when circumstances arise indicating potential impairment.
Goodwill and tradenames for each of the subsidiaries which are franchisors and operators of the Company SBRs (the "reporting units") are evaluated for impairment. If a qualitative assessment is performed and the fair value of a reporting unit's net assets or tradename more likely than not exceeds the carrying value of the reporting unit's net assets or tradename, respectively, no further evaluation is necessary. If a quantitative assessment is performed and the fair value of a reporting unit or tradename exceeds the carrying value of the reporting unit's net assets or tradename, respectively, the goodwill or tradename is not impaired. If the carrying value of the reporting unit's net assets or tradename exceeds the fair value of the reporting unit or tradename, respectively, an impairment charge is recorded for the difference.
Source: Item 23 — Receipts (FDD pages 92–334)
What This Means (2025 FDD)
According to the 2025 FDD, Moes Southwest Grill evaluates goodwill and tradenames for impairment annually at year-end. The evaluation can be either a qualitative or quantitative assessment. Additionally, Moes Southwest Grill may perform these evaluations more frequently if circumstances suggest a potential impairment.
The qualitative assessment involves determining if it is more likely than not that the fair value of the reporting unit's net assets or tradename exceeds their carrying value. If the fair value is likely higher, no further evaluation is needed. However, if a quantitative assessment is chosen, the fair value of the reporting unit or tradename is compared directly to its carrying value.
If the fair value exceeds the carrying value, the goodwill or tradename is not considered impaired. Conversely, if the carrying value exceeds the fair value, Moes Southwest Grill will record an impairment charge to account for the difference. This process ensures that the company's financial statements accurately reflect the value of these intangible assets.