Under what circumstances does Sonesta Simply Suites test goodwill for impairment more frequently than annually?
Sonesta_Simply_Suites 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
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Sonesta Simply Suites's 2025 Franchise Disclosure Document, goodwill is assessed for impairment annually. However, Sonesta Simply Suites will test goodwill for impairment more frequently than annually if 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, Sonesta Simply Suites may choose to perform an assessment of qualitative factors. If this assessment suggests that the fair value, including goodwill, is likely less than its carrying amount, or if the company decides to skip the qualitative assessment, a quantitative assessment is then conducted.
The quantitative assessment involves calculating an estimated fair value based on projected future cash flows and comparing this estimated fair value to the carrying amount, including goodwill. If the estimated fair value exceeds the carrying value, no impairment is recognized. However, if the carrying amount, including goodwill, exceeds the fair value, an impairment loss is recognized, limited to the total goodwill balance.