How are the debt issuance costs amortized for Basecamp Fitness?

According to Basecamp Fitness's 2025 Franchise Disclosure Document, the company defers debt issuance costs, which primarily consist of bank and legal fees related to the note payable and revolving credit facility. These costs are amortized over the terms of the facilities using the effective interest rate method.

For practical purposes, this means that Basecamp Fitness spreads the expense of obtaining debt (like loans) over the life of the loan. Instead of recognizing the entire cost upfront, they gradually deduct a portion of it each period. The 'effective interest rate method' is a specific accounting technique that calculates the amortization amount to reflect the true cost of borrowing over time, considering factors like origination fees or premiums.

Unamortized deferred financing costs related to term debt are recorded as a direct deduction from the carrying value of the associated debt liability. In contrast, unamortized deferred financing costs related to revolving credit facilities are recorded as noncurrent assets unless the original commitment is for less than one year. This distinction in treatment depends on the type of debt and its duration, affecting how these costs appear on Basecamp Fitness's balance sheet. For a prospective franchisee, understanding these accounting practices provides insight into how Basecamp Fitness manages and reports its debt-related expenses, which can be an indicator of its financial health and transparency.