El Pollo Loco 2015 Annual Report Download - page 76

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Table of Contents
EL POLLO LOCO HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We perform annual impairment tests for goodwill during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise.
We review goodwill for impairment utilizing either a qualitative assessment or a two-
step process. If we decide that it is appropriate to perform a
qualitative assessment and conclude that the fair value of a reporting unit more likely than not exceeds its carrying value, no further evaluation is
necessary. If we perform the two-step process, the first step of the goodwill impairment test is used to identify potential impairment by
comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying
amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying
amount of a reporting unit exceeds its fair value, the second step is performed to measure the amount of impairment by comparing the carrying
amount of the goodwill to a determination of the implied value of the goodwill. If the carrying amount of goodwill is greater than the implied
value, an impairment charge is recognized for the difference.
We perform annual impairment tests for indefinite-lived intangible assets during the fourth fiscal quarter of each year, or more frequently if
impairment indicators arise. An impairment test consists of either a qualitative assessment or a comparison of the fair value of an intangible asset
with its carrying amount. The excess of the carrying amount of an intangible asset over its fair value is its impairment loss.
The assumptions used in the estimate of fair value are generally consistent with the past performance of the Company’s reporting unit and are
also consistent with the projections and assumptions that are used in current operating plans. These assumptions are subject to change as a result
of changing economic and competitive conditions.
No impairment was recorded during the years ended December 31, 2014, December 25, 2013, or December 26, 2012.
Other Intangibles, Net—Definite Lived
Definite lived intangible assets consist of the value allocated to the Company’s favorable and unfavorable leasehold interests that resulted from
the Acquisition.
Favorable leasehold interest represents the asset in excess of the approximate fair market value of the leases assumed as of November 17, 2005,
the date of the Acquisition. The amount is being reduced over the approximate average life of the leases. This amount is shown as other
intangible assets, net, on the accompanying consolidated balance sheets.
Unfavorable leasehold interest liability represents the liability in excess of the approximate fair market value of the leases assumed as of
November 17, 2005, the date of the Acquisition. The amount is being reduced over the approximate average life of the leases. This amount is
shown as other intangible liabilities, net, on the accompanying consolidated balance sheets.
Intangible assets and liabilities with a definite life are amortized using the straight-line method over their estimated useful lives as follows:
72
Favorable leasehold interests
1 to 18 years (remaining lease term)
Unfavorable leasehold interests
1 to 20 years (remaining lease term)