What is the depreciation method used by Carls for property and equipment?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method based on the assets' estimated useful lives, which generally range from three to 40 years.
Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the related lease terms. The amortization period for leasehold improvements includes renewal option periods only in instances in which the exercise of the renewal option is reasonably certain at the acquisition date because failure to exercise such option would result in an economic penalty.
We capitalize direct costs and interest costs associated with construction projects that have a future benefit. If we subsequently make a determination that a site for which development costs have been capitalized will not be acquired or developed, any previously capitalized development costs are expensed and included in general and administrative expenses.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the company uses the straight-line method to calculate depreciation for its property and equipment. This means that the cost of an asset is evenly distributed over its estimated useful life. The estimated useful lives for these assets generally range from three to 40 years.
For leasehold improvements, Carls amortizes them on a straight-line basis over the shorter of either the estimated useful life of the assets or the related lease terms. The amortization period may include renewal option periods if exercising the renewal option is reasonably certain at the time of acquisition and failure to do so would result in an economic penalty.
Carls also capitalizes direct costs and interest costs associated with construction projects that are expected to provide a future benefit. However, if the company later determines that a site will not be acquired or developed, any previously capitalized development costs are expensed and included in general and administrative expenses.