What is the capitalization threshold for property and equipment expenditures for Best Brains?
Best_Brains Franchise · 2025 FDDAnswer from 2025 FDD Document
carry back or carry forward the loss to other years per the provisions of the IRC and reduces its taxable income and tax liability for those years.
The Corporation's business tax returns (Form 1120 and IL-1120) are subject to examination by federal and Illinois tax jurisdictions, generally for three years after the date it was filed.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Corporation considers all highly liquid investments with o
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 42)
What This Means (2025 FDD)
According to Best Brains' 2025 Franchise Disclosure Document, the company capitalizes expenditures for property and equipment exceeding $500. This means that any expense for property or equipment costing more than $500 is recorded as an asset on the balance sheet rather than being immediately expensed on the income statement. The asset is then depreciated over its estimated useful life, ranging from 5 to 39.5 years, using a straight-line or declining balance method. Software development costs are amortized over a period of 5 years. Depreciation/Amortization for the years ended December 31, 2023 and 2022 is $ 54,176.42 and $30,529.00 respectively.
For a Best Brains franchisee, this policy affects how their initial investments in items like furniture, computers, and software are accounted for. Instead of deducting the full cost in the year of purchase, they will spread the expense over several years through depreciation. This can impact the franchisee's reported profits and tax liabilities in the short term.
It's important for prospective franchisees to understand this capitalization policy and how it differs from expensing items immediately. Consulting with a financial advisor or accountant can help them project the financial impact of these accounting practices on their Best Brains franchise.