How does Buildingstars determine if an arrangement qualifies as a lease at its inception?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company determines if an arrangement is a lease at inception by determining whether the agreement conveys the right to control the use of the identified asset for a period of time, whether the Company has the right to obtain substantially all of the economic benefits from use of the identified asset, and the right to direct the use of the asset. Lease liabilities are recognized at the commencement date based upon the present value of the remaining future minimum lease payments over the lease term using the rate implicit in the lease or the risk-free rate. The risk-free rate is defined as the daily treasury par yield curve rate for a period of time that approximates the lease term. The Company's lease terms include options to renew or terminate the lease when it is reasonably certain that it will exercise the option.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 34–43)
What This Means (2025 FDD)
According to Buildingstars's 2025 Franchise Disclosure Document, the company determines if an arrangement is a lease at its inception by assessing whether the agreement conveys the right to control the use of the identified asset for a period of time.
Buildingstars also considers if the company has the right to obtain substantially all of the economic benefits from the use of the identified asset, and the right to direct the use of the asset. Lease liabilities are recognized at the commencement date based upon the present value of the remaining future minimum lease payments over the lease term using the rate implicit in the lease or the risk-free rate.
The risk-free rate is defined as the daily treasury par yield curve rate for a period of time that approximates the lease term. Buildingstars's lease terms include options to renew or terminate the lease when it is reasonably certain that it will exercise the option. This detailed approach ensures that Buildingstars accurately accounts for its lease obligations and assets in its financial statements.