How does Carbones Pizzeria provide for depreciation of assets?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
Long-Lived Assets
The Company periodically evaluates the net realizable value of long-lived assets, including property and equipment, and intangible assets, relying on a number of factors including operating results, business plans and economic projections, and anticipated future cash flows. An impairment in the carrying value of an asset is recognized when the fair value of the asset is less than its carrying value.
Depreciation and amortization
Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives. Leasehold improvements are primarily amortized over the shorter of the service lives of the improvements or the lease term. The straight-line method of depreciation is followed for financial reporting purposes, but accelerated methods are used for income tax purposes. The estimated service lives used for consolidated financial reporting purposes are as follows:
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, depreciation is calculated to allocate the cost of depreciable assets to operations over their estimated service lives. Leasehold improvements are amortized over the shorter of the service lives of the improvements or the lease term. For financial reporting, Carbones Pizzeria uses the straight-line method of depreciation, while accelerated methods are used for income tax purposes. The company periodically evaluates the net realizable value of long-lived assets, including property and equipment.
The estimated service lives are used for consolidated financial reporting purposes. An impairment in the carrying value of an asset is recognized when the fair value of the asset is less than its carrying value. This means that Carbones Pizzeria aims to systematically expense the cost of its assets over their useful life, reflecting the decline in value due to wear and tear or obsolescence.
For a prospective franchisee, understanding these depreciation methods is crucial for financial planning and tax strategy. The difference between straight-line and accelerated depreciation can impact taxable income and therefore tax liabilities. Additionally, the periodic evaluation of long-lived assets ensures that the company's asset values are realistic, which can affect the overall financial health of the franchise. Franchisees should consult with financial professionals to understand the implications of these accounting policies on their specific business circumstances.