What is the depreciation method used by Creative World School for property and equipment?
Creative_World_School Franchise · 2025 FDDAnswer from 2025 FDD Document
for the years ended December 31, 2024, 2023 and 2022 were $97,202, $26,867 and $29,584, respectively.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2024, 2023 and 2022
NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment:
Property and equipment is recorded at cost. Depreciation is c
Source: Item 23 — RECEIPTS (FDD pages 80–247)
What This Means (2025 FDD)
According to the 2025 Creative World School FDD, the company uses the straight-line method to calculate depreciation for property and equipment. This method evenly distributes the cost of an asset over its estimated useful life. For Creative World School, any expenditure exceeding $2,500 with a useful life greater than one year is capitalized, meaning it's recorded as an asset on the balance sheet rather than expensed immediately.
The estimated useful lives for different types of assets are as follows: computer equipment is depreciated over 1 to 3 years, while furniture and fixtures are depreciated over 3 to 7 years. This means that the cost of computer equipment will be spread out over a shorter period compared to furniture and fixtures, reflecting their expected lifespan and rate of obsolescence.
For a prospective Creative World School franchisee, understanding these depreciation methods and asset capitalization policies is important for financial planning and tax purposes. The straight-line method is relatively simple to calculate and provides a consistent depreciation expense each year, which can aid in budgeting and forecasting. Franchisees should keep these depreciation schedules in mind when projecting their profitability and managing their tax liabilities.