What accounting standard update did Basecamp Fitness adopt on January 1, 2024, regarding goodwill?
Basecamp_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
lue of each asset and liability. Any excess of purchase price over fair value of net
(in thousands of US dollars)
assets is recorded as goodwill. This allocation process requires use of estimates and assumptions, including estimates of future cash flows to be generated by the acquired assets. The Company applies the business combination guidance for acquisitions which meet the definition of a business in accordance with the revised guidance in ASU 2017-01, Business Combinations, which clarifies the definition of a business.
**Impairment of Long-Li
Source: Item 23 — RECEIPTS (FDD pages 62–248)
What This Means (2025 FDD)
According to Basecamp Fitness's 2025 Franchise Disclosure Document, the company adopted Financial Accounting Standards Update (ASU) No. 2014-02, Accounting for Goodwill, on January 1, 2024. This update allows Basecamp Fitness to elect to amortize goodwill on an entity-wide or reporting unit level over 10 years, or a shorter period if another useful life is deemed more appropriate.
For a prospective franchisee, this accounting change primarily affects how Basecamp Fitness manages and reports its financial performance. Goodwill, in accounting terms, represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. By adopting ASU No. 2014-02, Basecamp Fitness has the option to amortize this goodwill over a period of up to 10 years, which can impact the company's reported earnings and financial statements.
The amortization expense for the year ended December 31, 2024, amounted to $14,000. This figure indicates the initial impact of the accounting change on Basecamp Fitness's financial statements. While this change doesn't directly affect the day-to-day operations of a franchise, it provides insight into how Basecamp Fitness manages its acquisitions and reports its financial health, which can be a factor in assessing the stability and long-term prospects of the franchise system.
It's important for potential franchisees to understand these accounting practices as they reflect on the overall financial management and transparency of Basecamp Fitness. While the amortization of goodwill is a non-cash expense, it can influence the company's profitability metrics and, consequently, its attractiveness to investors and lenders. Therefore, understanding these financial nuances can aid in making a more informed decision about investing in a Basecamp Fitness franchise.