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Note 7. Goodwill and Other Intangible Assets
3 Months Ended
Mar. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Note 7. Goodwill and Other Intangible Assets

Goodwill

Goodwill consists of the excess of the purchase price over the fair value of the net assets acquired in connection with business acquisitions.

 

A reconciliation of the change in the carrying value of goodwill is as follows.

 

   Restaurants  Other  Total
Goodwill at December 31, 2016  $28,090   $11,913   $40,003 
Change in foreign exchange rates during first quarter 2017   9    —      9 
Goodwill at March 31, 2017  $28,099   $11,913   $40,012 

 

We are required to assess goodwill and any indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. When evaluating goodwill for impairment, we may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. If we do not perform a qualitative assessment, or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds its carrying amount, we test for potential impairment using a two-step approach. The first is the estimation of fair value of each reporting unit. If step one indicates that impairment potentially exists, the second step is performed to measure the amount of impairment, if any. Goodwill impairment occurs when the estimated fair value of goodwill is less than its carrying value.

 

The valuation methodology and underlying financial information included in our determination of fair value require significant management judgments. We use both market and income approaches to derive fair value. The judgments in these two approaches include, but are not limited to, comparable market multiples, long-term projections of future financial performance, and the selection of appropriate discount rates used to determine the present value of future cash flows. Changes in such estimates or the application of alternative assumptions could produce significantly different results. No impairment charges for goodwill were recorded in the first three months of 2017 or 2016.

Other Intangible Assets

Other intangible assets are composed of the following.

 

   March 31, 2017  December 31, 2016
   Gross carrying amount  Accumulated amortization  Total  Gross carrying amount  Accumulated amortization  Total
Franchise agreement  $5,310   $(3,717)  $1,593   $5,310   $(3,585)  $1,725 
Other   810    (717)   93    810    (707)   103 
Total   6,120    (4,434)   1,686    6,120    (4,292)   1,828 
Intangible assets with indefinite lives:                              
Trade names   15,876    —      15,876    15,876    —      15,876 
Other assets with indefinite lives   8,466    —      8,466    8,347    —      8,347 
Total intangible assets  $30,462   $(4,434)  $26,028   $30,343   $(4,292)  $26,051 

  

Intangible assets subject to amortization consist of franchise agreements connected with the purchase of Western as well as rights to favorable leases related to prior acquisitions. These intangible assets are being amortized over their estimated weighted average of useful lives ranging from eight to twelve years.

 

Amortization expense for the first quarters of 2017 and 2016 was $142 and $141, respectively. The Company’s intangible assets with definite lives will fully amortize in 2020. Total annual amortization expense for each of 2018 and 2019 will approximate $500.

 

Intangible assets with indefinite lives consist of trade names, franchise rights as well as lease rights.