How are leases included on Bor Restoration's balance sheets?
Bor_Restoration Franchise · 2024 FDDAnswer from 2024 FDD Document
agreements, franchises are required to pay royalty fees which are charged at the franchise level and determined based on a percentage of monthly gross sales. If the minimum levels of revenues are not achieved, a fixed fee is charged. These fees are billed and recognized when earned on a monthly basis.
Technology and Franchise Support Fees
Franchises are required to purchase on-going training, software and support fees. These fees are billed and considered fully earned on a monthly basis.
Notes To Financial Statements For The Years Ended December 31, 2023, 2022 and 2021
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Leases
The Company determines if an arrangement is or contains a lease at inception. Leases are included in right-of-use (ROU) assets and lease liabilities on the balance sheets. ROU assets and lease liabilities reflect the present value of the future minimum lease payments over the lease term, and ROU assets also include prepaid or accrued rent. Operating lease expense is recognized on a straight-line basis over the lease term. The Company does not report ROU assets and lease liabilities for its short-term leases (leases with a term of 12 months or less). Instead, the lease payments of those leases are reported as lease expense on a straight-line basis over the lease term.
Subsequent Events
The Company has performed an evaluation of subsequent events through March 26, 2024, which is the date the financial statements were available to be issued, and has considered any relevant matters in the preparation of the financial statements and footnotes.
Source: Item 23 — Receipts (FDD pages 40–202)
What This Means (2024 FDD)
According to Bor Restoration's 2024 Franchise Disclosure Document, the company addresses leases within its financial statements. Bor Restoration includes leases as right-of-use (ROU) assets and lease liabilities on its balance sheets. These ROU assets and lease liabilities are calculated based on the present value of future minimum lease payments over the lease term, and ROU assets may also include prepaid or accrued rent. The operating lease expense is recognized on a straight-line basis throughout the lease term.
However, Bor Restoration does not report ROU assets and lease liabilities for short-term leases, which are defined as leases with a term of 12 months or less. Instead, the lease payments for these short-term leases are reported as lease expenses on a straight-line basis over the lease term.
In 2022, Bor Restoration adopted Accounting Standards Update (ASU) No. 2016-02, Leases, which required lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. As a result of implementing ASU No. 2016-02, the Company recognized a right-of-use asset and a lease liability of $126,272, in its balance sheet as of January 1, 2022. The adoption did not result in a significant effect on amounts reported on the statement of operations for the year ended December 31, 2022.