How does Pump It Up calculate the impairment loss for intangible assets?
Pump_It_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
the net assets acquired. The Company amortizes goodwill on a straight-line basis over a 10-year period. Goodwill is reviewed for potential impairment if a triggering event occurs that indicates the Company's fair value may be below its carrying value. When impairment is likely, the Company calculates goodwill impairment as the amount the Company's carrying value including goodwill exceeds its fair value. As of December 31, 2024 and 2023, management believes no triggering events occurred.
Intangible Assets
The Company evaluates identifiable intangible assets not subject to amortization for impairment on an annual basis, or more frequently when events or changes in circumstances indicate that it is more likely than not that an asset is impaired. Such circumstances could include, but are not limited to, a significant decrease in the market value of an asset or a significant adverse change in the extent or manner in which an asset is used or in its physical condition. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized.
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Intangible Assets (Continued)
The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds the fair value of the asset.
Source: Item 23 — RECEIPTS (FDD pages 60–225)
What This Means (2025 FDD)
According to Pump It Up's 2025 Franchise Disclosure Document, the company evaluates identifiable intangible assets that are not subject to amortization for impairment on an annual basis. This evaluation also occurs more frequently if events or changes in circumstances suggest that an asset is likely impaired. These circumstances could include a significant decrease in the market value of an asset or a significant adverse change in how the asset is used or its physical condition.
To determine if an impairment loss should be recognized, Pump It Up compares the carrying amount of the asset to the estimated undiscounted future cash flows associated with it. If the sum of these expected future cash flows is less than the carrying value of the asset, an impairment loss is recognized.
The impairment loss is calculated as the amount by which the carrying value of the asset exceeds the fair value of the asset. The fair value is measured using various valuation techniques, including the discounted value of estimated future cash flows. Pump It Up must make assumptions about future cash flows over the life of the asset, which requires significant judgment, and actual results may differ from these assumptions and estimates. Intangible assets that do not have indefinite lives are amortized on a straight-line basis over the estimated useful life of the asset.