How often does Sonesta Select Sonesta Essential test goodwill for impairment?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
Goodwill is not amortized, and we test goodwill for impairment each year or more frequently should facts and circumstances indicate that it is more likely than not that the fair value is less than the carrying amount. As part of the impairment test, we may elect to perform an assessment of qualitative factors. If this qualitative assessment indicates that it is more likely than not that the fair value, including goodwill, is less than its carrying amount, or if we elect to bypass the qualitative assessment, we would then proceed with a quantitative assessment. The quantitative assessment involves calculating an estimated fair value based on projected future cash flows, and comparing the estimated fair value to the carrying amount, including goodwill. If the estimated fair value exceeds carrying value, including goodwill, no impairment is recognized. However, if the carrying amount, including
goodwill, exceeds fair value, an impairment loss is recognized in an amount equal to the excess, limited to the total goodwill balance.
We have not recognized any impairment on goodwill during the years ended December 31, 2024, 2023, and 2022.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 84)
What This Means (2025 FDD)
According to the 2025 FDD, Sonesta Select Sonesta Essential tests goodwill for impairment annually. They may also test more frequently if facts and circumstances suggest that the fair value of the goodwill is less than its carrying amount.
As part of the impairment test, Sonesta Select Sonesta Essential may choose to perform an assessment of qualitative factors to determine if a quantitative assessment is needed. If the qualitative assessment indicates that the fair value is likely less than the carrying amount, or if the qualitative assessment is bypassed, a quantitative assessment is performed. The quantitative assessment involves calculating an estimated fair value based on projected future cash flows and comparing it to the carrying amount, including goodwill.
If the estimated fair value exceeds the carrying value, including goodwill, no impairment is recognized. However, if the carrying amount, including goodwill, exceeds the fair value, an impairment loss is recognized. The loss is equal to the excess, but limited to the total goodwill balance. The FDD states that Sonesta Select Sonesta Essential did not recognize any impairment on goodwill during the years ended December 31, 2024, 2023, and 2022.