What method does Benihana use to calculate depreciation for property and equipment?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
Additions to property and equipment, including leasehold improvements, are recorded at cost while costs incurred to repair and maintain the Company's operations and equipment are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful life of the asset. When assets are retired or otherwise disposed of, the cost of the assets and the related accumulated depreciation are removed from the accounts, and any gain or loss on retirements is reflected in operating income in the year of disposition.
Computers and equipment as well as furniture and fixtures are depreciated over their useful lives from three to fifteen years. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the remaining term of the associated lease. Lease terms begin on the date the Company takes possession under the lease and include option periods where failure to exercise such options would result in an economic penalty.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the company calculates depreciation using the straight-line method over the estimated useful life of the asset. This means that the cost of the asset, less any salvage value, is divided evenly over its useful life to determine the annual depreciation expense.
For computers, equipment, furniture, and fixtures, Benihana depreciates these assets over a useful life ranging from three to fifteen years. Leasehold improvements, on the other hand, are depreciated over the shorter of their estimated useful lives or the remaining term of the associated lease. The lease term begins when Benihana takes possession of the property and includes any option periods where failure to exercise such options would result in an economic penalty.
When Benihana disposes of or retires assets, the cost of the assets and the related accumulated depreciation are removed from the accounts. Any gain or loss resulting from the retirement is then reflected in the operating income for that year. This is a standard accounting practice to ensure that the financial statements accurately reflect the value of the company's assets and any changes to that value over time.