For an Engel & Volkers franchise, how is the depreciation timeframe for leasehold improvements determined?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
| Office equipment | 5 - 7 years |
|---|---|
| Furniture and fixtures | 5 - 7 years |
| Leasehold improvements | Lesser of the lease term or estimated useful life |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers's 2025 Franchise Disclosure Document, the depreciation timeframe for leasehold improvements is determined by whichever is shorter: the lease term or the estimated useful life of the improvements. Leasehold improvements are alterations or upgrades made to a leased property.
This means that if a franchisee signs a five-year lease and makes improvements expected to last seven years, the depreciation will be calculated over the five-year lease term. Conversely, if the lease is for ten years, but the improvements are only expected to last eight years, the depreciation will be calculated over the eight-year useful life.
This policy affects how Engel & Volkers franchisees account for these expenses on their financial statements. A shorter depreciation period results in higher annual depreciation expenses, which can reduce taxable income. Franchisees should carefully consider the lease terms and expected life of any improvements when planning their initial investment and financial projections.