How are impairment losses shown on Exit's consolidated statements of income?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
Impairment losses, if any, are shown as impairment losses on the consolidated statements of income in the period in which the impairment is identified. The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale, at which point they are presented net of any impairment losses for the same digital assets held. In determining the gain to be recognized upon sale, the Company calculates the difference between the sales price and carrying value of the digital assets sold immediately prior to sale.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, impairment losses are specifically shown as impairment losses on the consolidated statements of income during the period in which the impairment is identified. This means that if Exit determines that the value of its digital assets has declined and an impairment loss has occurred, the loss will be reflected on the company's income statement for that specific reporting period. The impaired digital assets are then written down to their fair value at the time of impairment, establishing a new cost basis.
It's important to note that this new cost basis will not be adjusted upward, even if the fair value of the digital assets subsequently increases. This accounting treatment ensures that Exit does not recognize gains based on the recovery of previously impaired assets until they are actually sold. Any gains realized upon the sale of these assets are presented net of any prior impairment losses recognized for the same digital assets.
To determine the gain recognized upon sale, Exit calculates the difference between the sales price and the carrying value of the digital assets immediately before the sale. This approach provides a clear and consistent method for reporting impairment losses and subsequent gains on the sale of digital assets in Exit's consolidated statements of income.