How does Closet Storage Concepts account for expenditures for maintenance and repairs of property and equipment?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and equipment are stated at cost. Depreciation of property and equipment for financial reporting purposes is provided using the straight‐line method over their respective estimated useful lives ranging from 5 to 15 years. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. When property and equipment is sold or otherwise disposed of, the asset account and any accumulated depreciation accounts are relieved, and any gain or loss is included in other income and expense on the income statement.
The carrying amount of all long‐lived assets is evaluated periodically to determine if an adjustment to the depreciation period, or the non‐depreciated balance is warranted. Based on its most recent analysis, the Company believes that no impairment of property and equipment exists.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts' 2025 Franchise Disclosure Document, the company's accounting policy regarding property and equipment states that these assets are recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which range from 5 to 15 years.
For Closet Storage Concepts, expenditures that enhance the useful life of the property and equipment through major renewals or improvements are capitalized, meaning they are added to the asset's cost and depreciated over time. However, routine expenditures for maintenance and repairs are expensed as they are incurred. This means that these costs are recognized immediately on the income statement rather than being capitalized and depreciated.
When Closet Storage Concepts sells or disposes of property and equipment, the asset's account and any accumulated depreciation are removed from the balance sheet. Any resulting gain or loss from the sale is then included in other income and expense on the income statement. The company also evaluates the carrying amount of its long-lived assets periodically to determine if any adjustments to the depreciation period or the non-depreciated balance are necessary. As of its most recent analysis, Closet Storage Concepts believes that no impairment of property and equipment exists.