What is the maximum lease term for a lease to be considered short-term by Craters & Freighters?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
For all underlying classes of assets, the Company has elected to not recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less at lease commencement and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. Leases containing termination clauses in which either party may terminate the lease without cause and the notice period is less than 12 months are deemed short-term leases with lease costs included in short-term lease expense. The Company recognizes short-term lease cost on a straight-line basis over the lease term.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters FDD, a short-term lease is defined as having a lease term of 12 months or less at the commencement of the lease. This applies to leases where Craters & Freighters does not have an option to purchase the underlying asset that they are reasonably certain to exercise.
Additionally, Craters & Freighters considers leases with termination clauses as short-term leases if either party can terminate the lease without cause, and the notice period for termination is less than 12 months. In these instances, the lease costs are included in short-term lease expenses.
Craters & Freighters recognizes short-term lease costs on a straight-line basis over the lease term. This accounting treatment simplifies the recognition of assets and liabilities associated with these leases, as Craters & Freighters has elected not to recognize ROU (Right-of-Use) assets and lease liabilities for leases that qualify as short-term.