How is Property and Equipment stated for Crab N Spice?
Crab_N_Spice Franchise · 2024 FDDAnswer from 2024 FDD Document
Property and Equipment is stated at cost. Accounting principles generally accepted in the United States of America require that property and equipment be depreciated using the straight-line method. Depreciation in these financial statements reflects accelerated depreciation methods used for the tax return. The effects of these departures from accounting principles generally accepted in the United States of America on financial position, results of operations, and cash flows have not been determined. Expenditures for normal repairs and maintenance are charged to operations as incurred.
The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is present when the sum of the undiscounted estimated future cash flows expected to result from use of the assets is less than carrying value. If impairment is present, the carrying value of the impaired asset is reduced to its fair value. As of December 31, 2023, December 31, 2022, & December 31, 2021, no impairment loss has been recognized for long-lived assets.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 40–50)
What This Means (2024 FDD)
According to Crab N Spice's 2024 Franchise Disclosure Document, Property and Equipment is stated at cost. While accounting principles generally accepted in the United States of America require that property and equipment be depreciated using the straight-line method, depreciation in these financial statements reflects accelerated depreciation methods used for the tax return. The FDD states that the effects of these departures from accounting principles generally accepted in the United States of America on financial position, results of operations, and cash flows have not been determined. Expenditures for normal repairs and maintenance are charged to operations as incurred.
Crab N Spice reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is present when the sum of the undiscounted estimated future cash flows expected to result from use of the assets is less than carrying value. If impairment is present, the carrying value of the impaired asset is reduced to its fair value. As of December 31, 2023, December 31, 2022, & December 31, 2021, no impairment loss has been recognized for long-lived assets.
For a potential Crab N Spice franchisee, this means that the initial cost of property and equipment will be recorded on the balance sheet. However, the depreciation method used for tax purposes differs from standard accounting principles, which could affect the reported financial results. It is important to note that the financial statements do not determine the effects of these departures from accounting principles. Additionally, Crab N Spice periodically assesses its assets for impairment, which could lead to adjustments in their carrying value if their future cash flows are estimated to be less than their current value.