What is Craters & Freighters' policy regarding the costs of additions and betterments to property and equipment?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and equipment are stated at cost. The costs of additions and betterments are capitalized and expenditures for repairs and maintenance are expensed in the years incurred. When items of property and equipment are sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is included in income.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, the company's accounting policy is to state property and equipment at cost. When a Craters & Freighters franchisee makes additions or betterments to their property and equipment, these costs are capitalized, meaning they are added to the asset's value on the balance sheet.
However, expenditures for repairs and maintenance are treated differently. These costs are expensed during the year they are incurred, meaning they are deducted from revenue on the income statement in the period the expense took place. This distinction is important for franchisees to understand, as it affects how their expenses are recorded and depreciated for accounting and tax purposes.
When property and equipment are sold or retired, Craters & Freighters removes the related costs and accumulated depreciation from its accounts. Any gain or loss resulting from the sale or retirement is then included in the company's income for that period. This policy ensures that the financial statements accurately reflect the value of the assets and any changes in their value over time.