Goodwill & Other Intangibles |
3 Months Ended |
|---|---|
Mar. 29, 2020 | |
| Goodwill and Intangible Assets Disclosure [Abstract] | |
| Goodwill and Intangible Assets Disclosure |
Goodwill and Indefinite Life Intangibles
Despite the significant excess fair value identified in our annual goodwill and indefinite life intangibles impairment assessments performed at the end of fiscal year 2019, we determined that the reduced cash flow projections and the significant decline in our market capitalization as a result of the COVID-19 pandemic indicates a potential impairment may exist. As a result, we performed an interim impairment assessment to determine if it was more likely than not that the goodwill and indefinite life intangible assets were impaired as of March 29, 2020.
Goodwill
The first step of the goodwill impairment test compares the implied estimated fair value of the reporting unit to the carrying amount, including goodwill. The Company considers all of its stores in total as one reporting unit. If the estimated fair value of the reporting unit is less than the carrying amount, then it is more likely than not that a goodwill impairment exits and a second step must be completed in order to determine the amount of the goodwill impairment. In the second step, the implied fair value of the goodwill is determined by allocating fair value to all of its assets and liabilities, other than goodwill, in a manner similar to a purchase price allocation. If the resulting implied fair value of the goodwill that results from the application of this second step is less than the carrying amount of the goodwill, an impairment charge is recorded for the difference. We determined that goodwill is not impaired as of March 29, 2020.
Indefinite Life Intangibles
An intangible asset is determined to have an indefinite useful life when there are no legal, regulatory, contractual, competitive, economic or other factors that may limit the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the Company. Intangible assets acquired in a business combination are determined to have an indefinite useful life and are not amortized.
As part of our impairment assessment we calculate the estimated fair value of the indefinite-lived intangible asset and compare it to the carrying value. Fair value is estimated primarily using future discounted cash flow projections in conjunction with qualitative factors and future operating plans. When the carrying value exceeds fair value, an impairment charge is recorded for the amount of the difference. The Company also evaluated intangible assets that are not being amortized to determine whether events and circumstances continue to support an indefinite useful life. If an intangible asset that is not being amortized is determined to have a finite useful life, the asset will be amortized prospectively over the estimated remaining useful life and accounted for in the same manner as intangible assets subject to amortization. We determined that indefinite life intangibles are not impaired as of March 29, 2020.
The Company's impairment assessment process requires the use of estimates and assumptions including estimates and assumptions regarding the short and long-term impacts of COVID-19. Changes in the economic environment and the future effect that COVID-19 may have on our business could negatively impact our estimates and assumptions and result in future impairment charges.
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