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Planet Fitness Excludes $35.5 Million In Liabilities From Its Balance Sheet
Gym company excludes tens of millions in dollars of legally binding future lease payments off its books.
November 5, 2021
Planet Fitness (PLNT), a gym franchise, offers investors an incomplete picture of its future financial obligations. The company says it has $255.8 million in future operating lease liabilities. This understates Planet’s true liability since the company doesn’t count leases not yet commenced. The additional liabilities— which are buried in the footnotes— significantly understate the company’s future liabilities:

“As of September 30, 2021, operating lease payments exclude approximately $35,556 of legally binding minimum lease payments for leases signed but not yet commenced.”

Under the loophole, companies can omit from the balance sheet leases that haven’t started as well as corporate offices under construction or build-to-suit arrangements. It’s seemingly inconsistent with FASB’s guidance on the topic which states if a lease is legally binding— as Planet Fitness acknowledges— Topic 842 (ASU 2016-02) makes clear it must be accounted for on the balance sheet:

“A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability)...”
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