How does Exit initially record its digital assets?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company accounts for digital assets held as a result of these transactions as indefinite-lived intangible assets in accordance with ASC 350, Intangibles - Goodwill and Other. The company has ownership of and control over the digital assets and uses third-party custodial services to secure it. The digital assets are initially recorded at cost and are subsequently remeasured on the consolidated balance sheets at cost, net of any impairment losses incurred since acquisition.
The fair value of the Company's digital assets is determined on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange(s) that the Company has determined is the principal market for such assets (Level 1 inputs). The Company performs an analysis at year end to determine whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that the Company's digital assets are impaired. In determining if an impairment has occurred, the Company considers the market price of one unit of digital asset quoted on the active exchange at year end. If the then current carrying value of a digital asset exceeds the fair value so determined, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the price determined.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the company initially records its digital assets at cost. These digital assets, resulting from transactions, are treated as indefinite-lived intangible assets, adhering to ASC 350 guidelines. Exit maintains ownership and control over these assets, utilizing third-party custodial services for security.
Subsequently, Exit remeasures these digital assets on its consolidated balance sheets at cost, accounting for any impairment losses since acquisition. The fair value of these assets is determined non-recurringly, following ASC 820, and is based on quoted prices from active exchanges considered the principal market for the assets (Level 1 inputs).
At year-end, Exit analyzes whether events or changes in circumstances, particularly decreases in quoted prices on active exchanges, indicate potential impairment. If the current carrying value of a digital asset exceeds its fair value, an impairment loss is recognized, and the asset is written down to its fair value. This new cost basis is not adjusted upward for subsequent increases in fair value, and gains are recorded only upon sale, net of any impairment losses.