Under what circumstances does Pump It Up review long-lived assets for impairment?
Pump_It_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
ed on various valuation techniques, including the discounted value of estimated future cash flows.
The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. Intangibles that do not have indefinite lives are amortized on a straight-line basis over the estimated useful life of the asset.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Management does not believe impairment indicators were present as of December 31, 2024.
Accrued Marketing Fees and Due from Advertising Fund
The Company collects fees from franchisees which are used for advertising, marketing, research, and public relations programs.
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 reviews long-lived assets for impairment under specific circumstances. Pump It Up will assess these assets whenever events or changes in circumstances suggest that the carrying amount of an asset may not be recoverable. This means that if there are indicators that the asset's value has decreased significantly, Pump It Up will conduct a review to determine if an impairment has occurred.
The recoverability of assets that Pump It Up intends to continue using is evaluated by comparing the asset's carrying amount to the future undiscounted net cash flows expected to be generated by the asset. If the asset is considered impaired, the impairment is measured by determining the amount by which the asset's carrying amount exceeds its fair value. For assets that are intended to be disposed of, they are reported at the lower of their carrying amount or their fair value, less any costs associated with selling them.
In addition to long-lived assets, Pump It Up also 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 indicate that it is more likely than not that an asset is impaired. These circumstances could include 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. If the sum of the expected future cash flows is less than the carrying value of the asset being evaluated, an impairment loss would be recognized.
This accounting practice is important for prospective Pump It Up franchisees to understand because it affects the company's reported financial health. Impairment charges can reduce the company's profitability, which could impact its ability to support franchisees or invest in the brand. Franchisees should consider the potential for asset impairments when evaluating the financial stability of Pump It Up.