How does Checkers compute depreciation for property and equipment?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the lesser of their estimated useful lives (generally 10 years) or the remaining lease term. Maintenance and repairs are expensed as incurred. Impairment testing is performed at the enterprise level upon the occurrence of a triggering event indication that the fair value of the Company might be less than its carrying amount. When a triggering event occurs, the Company has the option to perform a qualitative assessment to determine whether a quantitative test is needed. If that assessment demonstrates that it is more likely than not that an impairment does not exist, no further testing is required. If impairment of property and equipment is more likely than not, a quantitative test is required that compares the fair value of the Company with its carrying amount. If the carrying amount exceeds fair value, that amount represents the impairment loss to be recognized, up to the carrying amount of property and equipment. Refer to Note 8 - Property and Equipment, Net for further information.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, depreciation for property and equipment is calculated using the straight-line method over the estimated useful lives of the assets. For leasehold improvements, depreciation is applied over the shorter period of either their estimated useful lives, generally 10 years, or the remaining term of the lease.
This means that Checkers systematically allocates the cost of its assets as an expense over their expected lifespan. The straight-line method ensures that an equal amount of depreciation expense is recognized each year, providing a consistent and predictable expense for financial reporting. For franchisees, understanding these depreciation methods is crucial for accurately assessing the financial health and profitability of their business, as it directly impacts the reported net income.
Maintenance and repairs are expensed as incurred, while expenditures for betterments are capitalized. Impairment testing is performed at the enterprise level upon the occurrence of a triggering event indication that the fair value of the Company might be less than its carrying amount. When a triggering event occurs, Checkers has the option to perform a qualitative assessment to determine whether a quantitative test is needed. If that assessment demonstrates that it is more likely than not that an impairment does not exist, no further testing is required. If impairment of property and equipment is more likely than not, a quantitative test is required that compares the fair value of the Company with its carrying amount. If the carrying amount exceeds fair value, that amount represents the impairment loss to be recognized, up to the carrying amount of property and equipment. Refer to Note 8 - Property and Equipment, Net for further information.