Are shipping and handling costs for Afuri Ramen Dumpling expensed when incurred?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
Direct costs of sales and servicing of franchise agreements are charged to operating expenses as incurred.
Property and equipment – Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets (5 years). Improvements which increase the useful life of property and equipment and replacements of major components property and equipment are capitalized while maintenance, repairs, and minor replacements are expensed as incurred.
Source: Item 23 — Receipts (FDD pages 50–189)
What This Means (2024 FDD)
Based on the 2024 Afuri Ramen Dumpling Franchise Disclosure Document, there is no specific mention of whether shipping and handling costs are expensed when incurred. However, the document does state that "Direct costs of sales and servicing of franchise agreements are charged to operating expenses as incurred." This suggests that costs directly related to sales and servicing, which could potentially include certain shipping and handling costs, are expensed as they occur.
Additionally, the FDD notes that "maintenance, repairs, and minor replacements are expensed as incurred" regarding property and equipment. This indicates a general practice of expensing costs as they are incurred, which might extend to shipping and handling, depending on their nature and materiality.
Because the FDD does not explicitly address shipping and handling costs, prospective Afuri Ramen Dumpling franchisees should seek clarification from the franchisor regarding the specific accounting treatment of these expenses. Understanding how these costs are handled can help franchisees better manage their financial planning and budgeting.