How does Pump It Up measure the recoverability of assets held and used?

According to Pump It Up's 2025 Franchise Disclosure Document, the company reviews long-lived assets for impairment when events or changes suggest that the carrying amount of an asset may not be recoverable. Recoverability is assessed by comparing the carrying amount of the asset to the future undiscounted net cash flows expected to be generated by the asset. This means Pump It Up estimates the total cash an asset will bring in over its remaining life, without discounting for the time value of money, and compares that to the asset's current book value.

If the anticipated future cash flows are less than the asset's carrying amount, the asset is considered impaired. The impairment loss is then measured by the difference between the asset's carrying amount and its fair value. Fair value is what a willing buyer would pay for the asset in an open market. Assets that are slated for disposal are reported at the lower of their carrying amount or their fair value, less any costs associated with selling them.

For prospective Pump It Up franchisees, this accounting practice indicates that the franchisor is actively monitoring the value of its assets and will recognize losses if those assets are not expected to generate sufficient cash flow in the future. This can provide a more realistic view of the company's financial health. The FDD states that management believed no impairment indicators were present as of December 31, 2024.