How does Beard Papas account for improvements and betterments that significantly extend the useful lives of assets?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed by a straight-line or double declining method over the estimated useful lives of the related assets of between 5 and 10 years. Leasehold improvements are amortized on a straight-line method over the term of the lease or estimated useful life, whichever is shorter. Items included in construction in progress are not depreciated until placed in service. The Company's office in Cerritos is construction in progress as of December 31, 2024. Maintenance and repair costs are charged to expense as incurred, and improvements and betterments that significantly extend the useful lives of the assets are capitalized. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation and amortization are removed from the accounts and the resulting gains or losses are recognized.
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
According to Beard Papas's 2025 Franchise Disclosure Document, the company's accounting practices address improvements and betterments to assets. Specifically, Beard Papas capitalizes improvements and betterments that significantly extend the useful lives of its assets. This means that instead of expensing these costs immediately, they are added to the asset's value on the balance sheet and depreciated over the extended useful life of the asset.
This approach is standard accounting practice, as it aligns the cost of the improvement with the period it benefits. By capitalizing these expenditures, Beard Papas aims to provide a more accurate representation of its financial position and profitability over time. This method ensures that the financial statements reflect the long-term value created by these improvements.
For a prospective Beard Papas franchisee, understanding this accounting treatment is important because it affects how the company reports its financial performance. Capitalizing improvements can impact the reported profitability in the short term, as the expense is spread out over a longer period. Franchisees should be aware of these accounting practices to better interpret the financial statements provided by Beard Papas and to understand how investments in property and equipment are managed.