How does Basecamp Fitness amortize debt issuance costs?
Basecamp_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company defers debt issuance costs, which consist primarily of bank and legal fees. Such costs are related to the note payable and revolving credit facility as described in Note 5 and are amortized over the terms of the facilities using the effective interest rate method. Unamortized deferred financing costs related to term debt are recorded as a direct deduction from the carrying value of the associated debt liability, while unamortized deferred financing costs related to revolving credit facilities are recorded as noncurrent assets unless the original commitment is for less than one year.
Source: Item 23 — RECEIPTS (FDD pages 62–248)
What This Means (2025 FDD)
According to Basecamp Fitness's 2025 Franchise Disclosure Document, debt issuance costs, which primarily include bank and legal fees related to the note payable and revolving credit facility, are deferred. These costs are then amortized over the terms of the facilities using the effective interest rate method.
For Basecamp Fitness, unamortized deferred financing costs related to term debt are recorded as a direct deduction from the carrying value of the associated debt liability. However, unamortized deferred financing costs related to revolving credit facilities are recorded as noncurrent assets, unless the original commitment is for less than one year.
For a prospective franchisee, understanding how debt issuance costs are handled is crucial, especially if they plan to utilize debt financing. The method of amortization can impact the franchisee's financial statements and tax obligations. Knowing that these costs are amortized over the term of the debt allows for a more accurate financial forecast. Additionally, the distinction between term debt and revolving credit facilities in how their unamortized costs are recorded can affect the franchisee's balance sheet and financial ratios.