When did Exit begin amortizing the goodwill associated with Legacy Success Group, LLC?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2025 | $ | 84,065 |
|---|---|---|
| 2026 | 84,065 | |
| 2027 | 84,065 | |
| 2028 | 83,997 | |
| 2029 | 83,808 | |
| Thereafter | 309,814 | |
| Total estimated amortization expense | $ 729,814 |
Goodwill
In accordance with update 2014-02 to the FASB Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other, the Company has elected to apply the accounting alternative for goodwill. The accounting alternative allows an entity to take goodwill relating to each business combination or reorganization event resulting in fresh-start reporting (amortizable unit of goodwill) and amortize it on a straight-line basis
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, Exit recorded goodwill associated with the acquisition of Legacy Success Group, LLC on January 1, 2018. During the year ended December 31, 2020, an additional $6,250 was assigned to goodwill in relation to the purchase agreement. The total goodwill associated with Legacy Success Group, LLC's reputation within its industry amounted to $24,973. Exit began amortizing this goodwill over a ten-year period, starting January 1, 2018.
For a prospective franchisee, this means that Exit accounted for the value of Legacy Success Group's reputation when it acquired the company. This goodwill, initially valued at $24,973, is being systematically expensed over a 10-year period, a common accounting practice to reflect the gradual consumption of the intangible asset's value. The amortization began on January 1, 2018, indicating that a portion of this goodwill has already been amortized by the time of the 2025 FDD.
The FDD also states that management determined there was no impairment related to this goodwill for the years ended December 31, 2024, 2023, and 2022. Impairment would mean that the value of the goodwill has declined significantly and would need to be written down. The amortization expense for the years ended December 31, 2024, 2023, and 2022, was $2,914 each year.
This accounting treatment provides transparency into how Exit manages its acquisitions and intangible assets. Franchisees may want to inquire about the performance of Legacy Success Group, LLC, and how its ongoing contribution aligns with the initial valuation of goodwill. Understanding the financial health and integration of acquired entities can help franchisees assess the overall stability and growth prospects of Exit.