How does Crave Cookies handle normal maintenance and repair costs for property and equipment?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and equipment - Property and Equipment - property and equipment is stated at cost. Depreciation expense is calculated on the straight-line method in an amount sufficient to write off the cost of depreciable assets over their estimated useful lives, ranging from three to five years.
Normal maintenance and repair are charged to costs and expenses as incurred. The cost and accumulated depreciation of property and equipment sold or otherwise retired are removed from the accounts and gain or loss on disposition is reflected in the net income in the period of disposition.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, normal maintenance and repair costs for property and equipment are treated as expenses. These costs are charged to costs and expenses as they are incurred. This means that Crave Cookies accounts for these expenditures in the period they happen rather than capitalizing them as assets.
This accounting practice is typical for most businesses, including franchises. By expensing maintenance and repair costs, Crave Cookies reflects these expenses on its income statement in the period they occur, which affects the company's profitability for that period.
Additionally, the FDD states that when property and equipment are sold or retired, the cost and accumulated depreciation are removed from the accounts. Any gain or loss from this sale or retirement is then reflected in the net income for the period in which the disposition occurs. This ensures that the financial statements accurately reflect the disposal of assets and any associated financial impact.