How does Bft recognize depreciation on property and equipment?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and equipment, net – Property and equipment includes software and digital platform and are carried at cost less accumulated depreciation. Depreciation is recognized on a straight-line method, based on the following estimated useful lives:
Software and digital platform 3-5 years
Software and digital platform consist primarily of costs associated with web development projects. The Company capitalizes eligible costs to acquire, develop, or modify digital platforms that are incurred subsequent to the preliminary project stage. Depreciation of these assets begins upon the initial usage of the digital platforms.
The cost and accumulated depreciation of assets sold or retired are removed from the accounts and any gain or loss is included in the results of operations during the period of sale or disposal.
Depreciation expense for the periods ended December 31, 2024 and 2023, was $4,460 and $2,844, respectively.
During the year ended December 31, 2024, the Company recorded an impairment of $2,233 related to a software asset for which the Company no longer had established cash flows to support continued recognition of such asset. Property and equipment impairment expenses are included within impairment of assets in the Company's consolidated statements of operations.
Source: Item 23 — RECEIPTS (FDD pages 79–265)
What This Means (2025 FDD)
According to Bft's 2025 Franchise Disclosure Document, property and equipment, including software and digital platforms, are recorded at cost, minus accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. For software and digital platforms, this useful life is estimated to be between 3 to 5 years. These assets primarily consist of costs related to web development projects, and depreciation begins when the digital platforms are initially used.
When assets are sold or retired, Bft removes their cost and accumulated depreciation from the accounts. Any gain or loss resulting from the sale or disposal is included in the results of operations for that period. For the periods ending December 31, 2024, and 2023, the depreciation expense was $4,460 and $2,844, respectively. Additionally, in 2024, Bft recorded an impairment of $2,233 related to a software asset due to the absence of established cash flows to support its continued recognition. These impairment expenses are included within the impairment of assets in the company's consolidated statements of operations.
For a prospective Bft franchisee, understanding these accounting practices is crucial for managing their own studio's finances. The depreciation method and useful life estimates directly impact the franchisee's reported profits and tax liabilities. Furthermore, the potential for asset impairments, as demonstrated by the $2,233 impairment in 2024, highlights the importance of carefully evaluating the ongoing value and cash flow generation of software and digital assets used in the Bft studio.