When does Petro Stopping Center write off financial assets?
Petro_Stopping_Center Franchise · 2025 FDDAnswer from 2025 FDD Document
Determination as to whether, and by how much, an asset, CGU, or group of CGUs containing goodwill is impaired involves management estimates on highly uncertain matters such as the effects of inflation and deflation on operating expenses, discount rates, capital expenditure, carbon pricing (where applicable), production profiles, reserves and resources, and future commodity prices, including the outlook for global or regional market supply-anddemand conditions for crude oil, natural gas, power and refined products. Judgement is required when determining the appropriate grouping of assets into a CGU or the appropriate grouping of CGUs for impairment testing purposes. For example, individual oil and gas properties may form separate CGUs whilst certain oil and gas properties with shared infrastructure may be grouped together to form a single CGU. Alternative groupings of assets or CGUs may result in a different outcome from impairment testing. See Note 10 for details on how these groupings have been determined in relation to the impairment testing of goodwill.
As described above, the recoverable amount of an asset is the higher of its value in use and its fair value less costs of disposal. Fair value less costs of disposal may be determined based on expected sales proceeds or similar recent market transaction data.
Details of impairment charges and reversals recognized in the income statement are provided in Note 3 and details on the carrying amounts of assets are shown in Note 8, Note 10 and Note 11.
The estimates for assumptions made in impairment tests in 2024 relating to discount rates and oil and gas properties are discussed below. Changes in the economic environment including as a result of the energy transition or other facts and circumstances may necessitate revisions to these assumptions and could result in a material change to the carrying values of the Company's assets within the next financial year.
Discount rates
For discounted cash flow calculations, future cash flows are adjusted for risks specific to the CGU. Value-in-use calculations are typically discounted using a pre-tax discount rate based upon the cost of funding the Company derived from an established model, adjusted to a pre-tax basis and incorporating a market participant capital structure and country risk premiums. Fair value less costs of disposal discounted cash flow calculations use a post-tax discount rate.
Source: Item 23 — RECEIPTS **RECEIPTS (FDD pages 87–131)
What This Means (2025 FDD)
Based on the 2025 FDD, Petro Stopping Center considers an asset to be impaired when its carrying amount exceeds its recoverable amount. The recoverable amount is the higher of its value in use and its fair value less costs of disposal. The determination of impairment involves management's estimates regarding uncertain matters such as inflation, discount rates, capital expenditure, carbon pricing, production profiles, reserves and resources, and future commodity prices. Judgment is also required in grouping assets for impairment testing. Details of impairment charges and reversals are provided in Note 3, and the carrying amounts of assets are shown in Notes 8, 10, and 11. Changes in the economic environment may necessitate revisions to these assumptions and could result in a material change to the carrying values of the Company's assets within the next financial year.
For oil and natural gas properties, expected future cash flows are estimated using management's best estimate of future oil and natural gas prices, production and reserves and certain resources volumes. In 2024, the Company identified oil and gas properties with carrying amounts totaling $5,966 million (2023 $5,938 million) where the headroom, based on the most recent impairment test performed in the year on those assets, was less than or equal to 20% of the carrying value. A change in the discount rate, reserves, resources or the oil and gas price assumptions in the next financial year may result in a recoverable amount of one or more of these assets above or below the current carrying amount and therefore there is a risk of impairment reversals or charges in that period.
For prospective Petro Stopping Center franchisees, this means that the value of assets, particularly those related to oil and gas, is subject to periodic review and potential write-downs based on various economic factors and management's estimates. These write-downs can impact the financial performance of the company and, potentially, the value of the franchisee's investment. It is important for franchisees to understand the assumptions and estimates used in these impairment tests and how they could affect the value of their assets. Franchisees should also refer to the specific notes in the financial statements (Notes 3, 8, 10, and 11) for more detailed information on impairment charges and asset carrying amounts.