Burger King 2012 Annual Report Download - page 62

Table of Contents
necessary, goodwill is then written down to its implied fair value. Our impairment review for the Brand consists of a qualitative assessment similar to goodwill
and if necessary, a comparison of the fair value of the Brand with its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is
recognized in an amount equal to that excess. If the fair value exceeds its carrying amount, the Brand is not considered impaired.
Goodwill and our Brand are tested for impairment at least annually on October 1 of each year. During the year ended December 31, 2012, we elected to
perform a qualitative goodwill impairment assessment by evaluating whether it was more-likely-than-not that our reporting units’ fair values were less than
their carrying values. Based on this analysis, none of the goodwill in our reporting units was considered more-likely-than-not to be impaired as of October 1,
2012 and thus we did not proceed to the two-step goodwill impairment test. Similarly, we performed a qualitative assessment of our Brand and determined it
was not more-likely-than-not to be impaired as of October 1, 2012. Significant changes in the estimates used in our analysis could result in an impairment
charge related to goodwill and/or intangible assets not subject to amortization. In addition, we could record impairment losses in the future if profitability and
cash flows of our reporting units decline to the point where their carrying values exceeded their market values.


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Long-lived assets (including intangible assets subject to amortization) are tested for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Some of the events or changes in circumstances that would trigger an impairment test include, but
are not limited to:
• significant under-performance relative to expected and/or historical results (negative comparable sales growth or operating cash flows for two
consecutive years);
• significant negative industry or economic trends;
• knowledge of transactions involving the sale of similar property at amounts below our carrying value; or
• our expectation to dispose of long-lived assets before the end of their estimated useful lives, even though the assets do not meet the criteria to be
classified as “held for sale.”
The impairment test for long-lived assets requires us to assess the recoverability of our long-lived assets by comparing their net carrying value to the
sum of undiscounted estimated future cash flows directly associated with and arising from our use and eventual disposition of the assets. If the net carrying
value of a group of long-lived assets exceeds the sum of related undiscounted estimated future cash flows, we would be required to record an impairment
charge equal to the excess, if any, of net carrying value over fair value.
When assessing the recoverability of our long-lived assets, we make assumptions regarding estimated future cash flows and other factors. Some of these
assumptions involve a high degree of judgment and also bear a significant impact on the assessment conclusions. Included among these assumptions are
estimating undiscounted future cash flows, including the projection of comparable sales, restaurant operating expenses, capital requirements for maintaining
property and equipment and residual value of asset groups. We formulate estimates from historical experience and assumptions of future performance, based
on business plans and forecasts, recent economic and business trends, and competitive conditions. In the event that our estimates or related assumptions
change in the future, we may be required to record an impairment charge.


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Source: Burger King Worldwide, Inc., 10-K, February 22, 2013 Powered by Morningstar® Document Research℠
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