How does Clear Pest Pros record its property and equipment?
Clear_Pest_Pros Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and Equipment
Property and equipment are recorded at cost. The straight-line method is used for computing depreciation. Assets are depreciated over their estimated useful lives. The cost of leasehold improvements is depreciated over the lesser of the length of the related leases or the estimated useful lives of the assets. Costs of maintenance and repairs are charged to expense when incurred.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 67)
What This Means (2025 FDD)
According to Clear Pest Pros's 2025 Franchise Disclosure Document, the company records property and equipment at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. For leasehold improvements, Clear Pest Pros depreciates them over the shorter of the lease length or the asset's estimated useful life. Routine maintenance and repairs are expensed as they are incurred.
For a prospective franchisee, this means that Clear Pest Pros capitalizes its property and equipment, meaning it records the initial cost of these assets on its balance sheet rather than expensing them immediately. The use of the straight-line depreciation method means that the cost of the asset is evenly spread over its useful life. This can impact the company's reported profits, as depreciation expense reduces taxable income.
The FDD also provides a summary of property and equipment as of December 31 for the years 2022, 2023 and 2024. As of December 31, 2024, machinery and equipment was valued at $861, vehicles at $276, furniture and fixtures at $191, office and computer equipment at $1,823, leasehold improvements at $445 and construction in progress at $488. The total cost was $4,084, less accumulated depreciation of $2,409, resulting in net property and equipment of $1,675.
Understanding these accounting practices is crucial for franchisees as it provides insight into how Clear Pest Pros manages its assets and reports its financial performance. Reviewing the depreciation methods and asset valuations can help potential franchisees assess the financial stability and investment strategies of the company.