For 7 Brew, how are property and equipment assets valued on the financial statements?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
. The accounts receivable balance at December 26, 2021was $0.2 million.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are charged to expense on the straight-line basis over the estimated useful lives of each asset. The Company also capitalizes costs associated with the acquisition and development of major software for
Notes to Financial Statements
internal use and once ready for its intended use, will amortize the assets over the expected life of the software.
The estimated useful lives for each major depreciable classification of property and equipment are as follows:
Computers and software 3 - 5 years Furniture and office equipment 5 - 10 years
Long-Lived Asset Impairment
The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset are less than the carrying amount of the asset, the asset cost is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 82)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, property and equipment are recorded at cost. Depreciation and amortization are recognized as expenses using the straight-line method over the estimated useful life of each asset. The company also capitalizes costs related to the acquisition and development of major software for internal use, amortizing these assets over their expected life once they are ready for their intended use.
The estimated useful lives for different categories of property and equipment are as follows: Computers and software are depreciated over 3 to 5 years, while furniture and office equipment are depreciated over 5 to 10 years. This means that the cost of these assets is spread out over their respective useful lives, reflecting their gradual consumption or obsolescence.
7 Brew also assesses the recoverability of the carrying value of long-lived assets whenever events or circumstances suggest that the carrying amount may not be recoverable. If the expected future cash flows from the asset's use and eventual disposition are less than its carrying amount, the asset's cost is adjusted to fair value, and an impairment loss is recognized. For the years ended December 29, 2024, December 31, 2023, and December 25, 2022, there was no asset impairment, indicating that the carrying values of the company's assets were deemed recoverable during those periods.
In March 2025, 7 Brew's balance sheet listed property and equipment, net of depreciation, at a value of $1,699,000. This indicates the net book value of these assets after accounting for accumulated depreciation. Prospective franchisees should understand these accounting policies, as they affect the reported financial performance and asset values of the franchise, and may influence decisions related to capital investments and asset management.