What impact do estimates and assumptions made by management have on Exit's consolidated financial statements?

According to Exit's 2025 Franchise Disclosure Document, the preparation of consolidated financial statements requires Exit's management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Changes in these estimates are recorded in the period they become known.

In practice, this means that Exit's financial statements are not purely based on hard numbers but also reflect management's best judgment about future events and conditions. For example, Exit must estimate potential credit losses on receivables, which involves considering historical collection experience, current market factors, and forecasted economic conditions. These estimates directly impact the allowance for credit losses reported on the balance sheet and the bad debt expense recognized on the income statement.

Prospective franchisees should understand that these estimates introduce a degree of uncertainty into Exit's financial statements. While the statements are prepared in accordance with generally accepted accounting principles (GAAP) and audited by independent auditors, actual results could differ from management's estimates. This is a standard practice in accounting, but it's important for franchisees to recognize that the financial picture presented is not an absolute guarantee of future performance.