How does Brightstar Care determine if an arrangement contains a lease?
Brightstar_Care Franchise · 2025 FDDAnswer from 2025 FDD Document
ted amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Leases
The Company determines if an arrangement contains a lease in whole or in part at the inception of the contract. Right-of-use (ROU) assets represent the right to use an underlying asset for the lease term while lease liabilities represent the obligation to make lease payments arising from the lease. All leases with an expected term greater than 12 months result in the recognition of an ROU asset and liability at the lease commencement date based on the present value of the lease payments over the lease term. The Company elected the practical expedient for private companies that allows companies to use the risk-free discount rate at the lease commencement date to determine the present value of the lease payments instead of calculating their incremental borrowing rate.
The lease term includes all non-cancelable periods and may include options to extend (or to not terminate) the lease when it is reasonably certain that the Company will exercise that option. Leases that have a term of 12 months or less at the commencement date are expensed on a straight-line basis over the lease term and do not result in the recognition of a ROU asset of lease liability.
Notes to Consolidated Financial Statements
Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease payments are expensed in the period in which the obligation for those payments is incurred. The Company has elected to combine lease and non-lease components, such as fixed maintenance costs, as single lease component in calculating ROU assets and lease liabilities for all classes of leased assets.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 117)
What This Means (2025 FDD)
According to Brightstar Care's 2025 Franchise Disclosure Document, the company determines if an arrangement contains a lease in whole or in part at the inception of the contract. Right-of-use (ROU) assets represent the right to use an underlying asset for the lease term, while lease liabilities represent the obligation to make lease payments arising from the lease.
For leases with an expected term greater than 12 months, Brightstar Care recognizes an ROU asset and liability at the lease commencement date. This recognition is based on the present value of the lease payments over the lease term. Brightstar Care has elected the practical expedient for private companies, allowing them to use the risk-free discount rate at the lease commencement date to determine the present value of lease payments, rather than calculating their incremental borrowing rate.
The lease term includes all non-cancelable periods and may include options to extend (or not terminate) the lease when it is reasonably certain that Brightstar Care will exercise that option. Leases with a term of 12 months or less at the commencement date are expensed on a straight-line basis over the lease term. These short-term leases do not result in the recognition of an ROU asset or lease liability. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease payments are expensed in the period in which the obligation for those payments is incurred. Brightstar Care has elected to combine lease and non-lease components, such as fixed maintenance costs, as a single lease component in calculating ROU assets and lease liabilities for all classes of leased assets and has also elected to implement the short-term lease exception policy.