What costs does Canopy Lawn Care expense as incurred related to 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 Canopy Lawn Care's 2025 Franchise Disclosure Document, certain costs related to internal-use software are expensed as incurred. These include costs during the preliminary project stage, as well as costs for maintenance and training related to the software. This means that Canopy Lawn Care recognizes these expenses immediately rather than capitalizing them as assets.
For a prospective Canopy Lawn Care franchisee, this accounting practice affects the company's financial statements. Expensing these costs reduces the company's short-term profitability but avoids the complexities of amortizing capitalized costs over time. This approach is generally conservative, as it recognizes expenses sooner rather than later.
It's important to note that Canopy Lawn Care capitalizes other costs associated with internal-use software, such as direct external costs, internal payroll, and payroll-related costs for employees directly involved in the project. Capitalization begins after the preliminary project stage when management commits to funding the project, project completion is probable, and the software is intended for its specific function. Capitalization ceases once the project is substantially complete and ready for use.