When preparing the consolidated financial statements, what evaluation is management required to perform regarding the company's ability to continue as a going concern for Basecamp Fitness?

According to Basecamp Fitness's 2025 Franchise Disclosure Document, when preparing the consolidated financial statements, management must evaluate whether there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern for one year after the consolidated financial statements are available to be issued. This evaluation is a standard accounting practice.

This "going concern" evaluation is crucial for prospective Basecamp Fitness franchisees because it assesses the financial stability and long-term viability of the franchisor. If substantial doubt exists, it could indicate potential risks related to the franchisor's ability to support its franchisees, invest in the brand, or meet its financial obligations. A franchisee wants to ensure the franchisor is stable and will be around to support them.

It is important to note that the auditor also plays a role in evaluating the appropriateness of accounting policies and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. The auditor must also conclude whether, in their judgment, there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern for a reasonable period of time. This provides an additional layer of scrutiny and assurance regarding the financial health of Basecamp Fitness.