How are Bumper Man's long-lived assets to be disposed of by sale reported?
Bumper_Man Franchise · 2025 FDDAnswer from 2025 FDD Document
Long-lived assets to be held and used are tested for recoverability whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the excess of the asset's carrying amount over the fair value of the asset. Certain long-lived assets to be disposed of by sale are reported at the lower of carrying amount or fair value less cost to sell.
Source: Item 23 — RECEIPTS (FDD pages 45–180)
What This Means (2025 FDD)
According to Bumper Man's 2025 Franchise Disclosure Document, long-lived assets that are slated for disposal through sale are reported at the lower value between their carrying amount and their fair value, minus the cost to sell.
In accounting terms, the "carrying amount" refers to the asset's original cost, less any accumulated depreciation. Fair value represents the price that would be received to sell the asset in an orderly transaction between market participants. The "cost to sell" includes expenses directly associated with the disposal, such as brokerage commissions, legal fees, and advertising costs.
This accounting practice ensures that the financial statements of Bumper Man accurately reflect the economic reality of the asset's worth. By reporting the asset at the lower of its carrying amount or fair value less costs to sell, the company avoids overstating its assets and provides a more conservative view of its financial position. This approach is consistent with generally accepted accounting principles (GAAP) and aims to provide transparency and reliability in financial reporting.