For income tax purposes, does Anago use an accelerated or straight-line method of depreciation?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and equipment are reported at cost and include improvements that significantly add to utility or extend the useful life. Cost of maintenance and repairs are charged to expense when incurred. When depreciable assets are disposed of, the cost and related accumulated depreciation are removed from the accounts, and any gain or loss is included in earnings for the period of disposal. Depreciation on office and cleaning equipment and vehicles are calculated principally by the straight-line method over a useful life of five to seven years. Leasehold improvements are depreciated over the life of the lease.
For income tax purposes the Company uses an accelerated method of depreciation.
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, Anago uses different depreciation methods for financial reporting and income tax purposes. For financial reporting, Anago primarily uses the straight-line method to depreciate its office and cleaning equipment and vehicles over a useful life of five to seven years. Leasehold improvements are depreciated over the life of the lease. The straight-line method evenly distributes the depreciation expense over the asset's useful life.
However, for income tax purposes, Anago utilizes an accelerated method of depreciation. Accelerated depreciation methods allow for a larger depreciation expense in the early years of an asset's life, which can result in lower taxable income during those years. This can provide tax benefits to Anago in the short term.
It's important to note that these depreciation methods are used by Anago itself. As a franchisee, you will need to determine the appropriate depreciation method for your own assets, in accordance with accounting principles and tax regulations. You should consult with a financial professional to determine the best approach for your specific circumstances.