Under what conditions does Bumble Roofing begin capitalizing costs for internal-use software?
Bumble_Roofing Franchise · 2025 FDDAnswer from 2025 FDD Document
Additionally, the Company capitalizes certain costs incurred in connection with developing or obtaining internaluse software. Capitalized costs include direct external costs, internal payroll, and payroll-related costs for employees who are directly associated with and devote time to the project. Costs incurred during the preliminary project stage, as well as costs for maintenance and training, are expensed as incurred. Capitalization begins when the preliminary project stage is complete, management authorizes and commits to funding the project, it is probable that the project will be completed, and the software will be used for its intended function. Capitalization ceases when the project is substantially complete and ready for its intended use.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 53)
What This Means (2025 FDD)
According to Bumble Roofing's 2025 Franchise Disclosure Document, the company capitalizes certain costs related to developing or obtaining internal-use software. These costs encompass direct external expenses, internal payroll, and payroll-related costs for employees directly involved in the project. However, costs incurred during the preliminary project stage, as well as those for maintenance and training, are expensed as they occur.
Bumble Roofing initiates capitalization when specific conditions are met. These conditions include the completion of the preliminary project stage, management's authorization and commitment to funding the project, a high probability of project completion, and the software's readiness for its intended function. Capitalization concludes once the project is substantially complete and prepared for its intended use.
For a prospective Bumble Roofing franchisee, this accounting policy means that the franchisor invests in and develops its own software, which could provide a competitive advantage. Understanding when these costs are capitalized versus expensed can offer insights into the company's financial management and investment strategies. Franchisees may want to inquire about the types of internal-use software Bumble Roofing develops and how these tools benefit their franchise operations.