How does Craters & Freighters recognize short-term lease cost?
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 FDD, Craters & Freighters does not recognize right-of-use (ROU) assets and lease liabilities for short-term leases. Short-term leases are defined as those with a term of 12 months or less at the commencement of the lease and that do not include an option to purchase the underlying asset that Craters & Freighters is reasonably certain to exercise.
Leases containing termination clauses, where either party can terminate without cause and the notice period is less than 12 months, are also considered short-term leases. The costs associated with these short-term leases are included in short-term lease expense.
Craters & Freighters recognizes these short-term lease costs on a straight-line basis over the lease term. This means that the total cost of the lease is divided evenly across the duration of the lease, providing a consistent expense each period. This method simplifies the accounting for leases that are not expected to extend beyond a year and do not have purchase options.