When does Canopy Lawn Care cease capitalizing costs for internal-use software?
Canopy_Lawn_Care 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 55)
What This Means (2025 FDD)
According to the 2025 FDD, Canopy Lawn Care capitalizes certain costs related to developing or obtaining internal-use software. These costs include direct external costs, internal payroll, and payroll-related costs for employees directly involved in the project. However, costs incurred during the preliminary project stage, as well as costs for maintenance and training, are expensed as they are incurred.
Capitalization for Canopy Lawn Care begins when the preliminary project stage is complete, management approves and commits to funding the project, it is probable 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. This means that once the software is fully developed and ready to be implemented, Canopy Lawn Care will stop adding costs to the asset's book value and begin depreciating it over its useful life, which the FDD states is typically between 5-15 years for internally developed software.