For Brightstar Care, what is included in the lease term when calculating right-of-use assets and lease liabilities?
Brightstar_Care Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 117)
What This Means (2025 FDD)
According to Brightstar Care's 2025 Franchise Disclosure Document, the lease term used in calculating right-of-use (ROU) assets and lease liabilities includes all non-cancelable periods. It may also include options to extend the lease if it is reasonably certain that Brightstar Care will exercise that option, or options to not terminate the lease if it is reasonably certain that Brightstar Care will not terminate the lease.
Brightstar Care recognizes ROU assets and lease liabilities for leases with an expected term greater than 12 months. These are recognized at the lease commencement date, based on the present value of lease payments over the lease term. For leases with a term of 12 months or less at the commencement date, Brightstar Care expenses these on a straight-line basis over the lease term, and does not recognize an ROU asset or lease liability.
Brightstar Care has elected to combine lease and non-lease components, such as fixed maintenance costs, as a single lease component when calculating ROU assets and lease liabilities for all classes of leased assets. They have also elected to implement the short-term lease exception policy. This means that when evaluating a potential Brightstar Care franchise location, a prospective franchisee should consider that the lease term used for accounting purposes includes not only the base term but also any extension options that are reasonably likely to be exercised, as well as fixed maintenance costs.