What is the depreciation method used for property and equipment for Atwell Suites, as stated in the financial statements?
Atwell_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
accounts to satisfy insurance claims.
Accounts Receivable
Accounts receivable arise from sales to a large number of customers. Accounts receivable are recorded at their original amount less an allowance for any expected lifetime credit losses. The lifetime credit losses are estimated by means of a provision matrix that is based on historical credit loss experience by region and number of days past due. For certain defined owner groups, for example those in financial distress, lifetime expected credit losses are calculated by reference to recent credit loss experience for that specific population. Management also reviews relevant past events, current conditions and reasonable and supportable forecasts about the future in order to establish whether the loss rates implied by the provision matrix should be amended. In the normal course of business, the Company extends credit generally without requiring collateral.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and any impairment charges. Expenditures for replacements and major improvements are capitalized and depreciated.
Repair and maintenance costs are expensed as incurred. Land is not depreciated. Depreciation is recognized using the straight-line method over the estimated useful lives of the assets: buildings – 30 to 50 years, and furniture and equipment − 3 to 25 years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the remaining lease term.
Source: Item 23 — Receipts (FDD pages 99–486)
What This Means (2025 FDD)
According to Atwell Suites' 2025 Franchise Disclosure Document, property and equipment are recorded at cost, less accumulated depreciation and any impairment charges. Atwell Suites recognizes depreciation using the straight-line method over the estimated useful lives of the assets. Buildings are depreciated over 30 to 50 years, while furniture and equipment are depreciated over 3 to 25 years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the remaining lease term. Land is not depreciated.
For a prospective Atwell Suites franchisee, understanding these depreciation methods is crucial for financial planning and forecasting. The straight-line method provides a consistent depreciation expense each year, simplifying budgeting. The varying useful lives for different asset types (buildings vs. furniture) reflect their expected periods of service and can impact the franchisee's tax obligations and profitability calculations.
Notably, software development costs are capitalized and amortized on a straight-line basis over three to ten years, depending on the asset's useful life. Total depreciation and amortization expense was $32.8 million, $33.9 million and $36.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. Software amortization included in this expense for the years ended December 31, 2024, 2023 and 2022, was $17.0 million, $18.4 million and $21.9 million, respectively. Additional depreciation expense of $77.0 million, $76.8 million, and $80.1 million has been charged to the System Fund in the years ended December 31, 2024, 2023 and 2022, respectively, and is included in 'System Fund and reimbursable expenses' on the consolidated statements of net income. Fully depreciated assets with a gross book value of $53.4 million and $68.3 million have been written off during the years ended December 31, 2024, and 2023 respectively. The gross book value and corresponding amortization have been reversed, with no impact on the net book value.
It is important to note that Atwell Suites evaluates property and equipment for recoverability when circumstances suggest the carrying value may not be recoverable. If impaired, the impairment is measured by the difference between the asset's carrying amount and its fair value, based on discounted future cash flows. This process can affect the reported value of assets and the overall financial health of the franchise.