How often does Moes Southwest Grill evaluate its tradenames for impairment?
Moes_Southwest_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
Intangible assets consist primarily of tradenames and franchise agreements. The Company does not amortize tradenames. Tradenames for each of the Franchising Entities are evaluated for impairment using a qualitative or quantitative assessment annually at year-end, or more frequently when circumstances arise indicating potential impairment. If a qualitative assessment is performed and the fair value of a tradename more likely than not exceeds the carrying value of the tradename, no further evaluation is necessary. If a quantitative assessment is performed and the fair value of a tradename exceeds the carrying value of the tradename, the tradename is not impaired. If the carrying value of the tradename exceeds the fair value of the tradename, 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 its tradenames for impairment at least annually. Specifically, the tradenames are assessed using either a qualitative or quantitative approach at year-end. However, the evaluation may occur more frequently if circumstances suggest a potential impairment.
The qualitative assessment involves determining if the fair value of the tradename is likely to exceed its carrying value. If this is the case, no further evaluation is needed. If a quantitative assessment is performed, the fair value of the tradename is compared to its carrying value. If the fair value exceeds the carrying value, the tradename is not considered impaired.
However, if the carrying value of the tradename exceeds its fair value, an impairment charge is recorded to reflect the difference. This process ensures that the value of the tradename on the company's financial statements accurately reflects its current market value and potential for future revenue generation. This is a standard accounting practice to ensure that assets are not overstated on the balance sheet.