Over what period does Clear Pest Pros depreciate ROU assets?
Clear_Pest_Pros Franchise · 2025 FDDAnswer from 2025 FDD Document
- ROU Assets The Company recognizes ROU assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). ROU assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of ROU assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. ROU assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 67)
What This Means (2025 FDD)
According to Clear Pest Pros's 2025 Franchise Disclosure Document, ROU (Right-of-Use) assets are depreciated on a straight-line basis. This depreciation occurs over the shorter of two periods: the lease term or the estimated useful lives of the assets.
For a prospective Clear Pest Pros franchisee, this means that the depreciation period for assets like leased office space or equipment will depend on how long the lease is for that specific asset and what Clear Pest Pros estimates as the useful life of that asset. If the lease term is shorter than the asset's estimated useful life, the lease term will be used for depreciation. Conversely, if the estimated useful life is shorter, that period will be used.
This approach is fairly standard in accounting for leases. The straight-line method ensures that the depreciation expense is evenly distributed over the asset's useful life or lease term, providing a consistent expense each period. Franchisees should be aware of these depreciation practices as they impact the financial statements and tax obligations of their Clear Pest Pros franchise.