What aspects of 360 Painting's consolidated financial statements require the use of significant management estimates?

According to 360 Painting's 2025 Franchise Disclosure Document, the preparation of consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities, the disclosure of contingent items, and the reported amounts of revenues and expenses. These estimates are made in accordance with accounting principles generally accepted in the United States of America.

Specifically, the areas that require significant management estimates include purchase price allocation and the carrying value of goodwill and other long-lived assets. Purchase price allocation involves estimating the fair values of assets and liabilities acquired in a business combination. Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired. The carrying value of long-lived assets, such as property, plant, and equipment, is subject to impairment reviews, which require estimating future cash flows.

For a prospective 360 Painting franchisee, this means that the financial statements include judgments made by the company's management. These judgments can affect the reported financial position and results of operations. While these estimates are a normal part of financial reporting, it is important for franchisees to understand that they are subject to uncertainty and could change in the future. Franchisees may want to discuss these estimates with 360 Painting or their own financial advisors to gain a better understanding of their potential impact.