When does Epcon Communities recognize operating lease ROU assets and operating lease liabilities?
Epcon_Communities Franchise · 2025 FDDAnswer from 2025 FDD Document
Operating leases are included in operating lease right-of-use (ROU) assets, net and operating leases (lease liabilities) within the Company's accompanying consolidated balance sheets.
ROU assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments. Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses the implicit rate when it is readily determinable. If the Company's leases do not provide an implicit rate, the Company elected the practical expedient to utilize the risk-free rate to determine the present value of lease payments. Operating lease ROU assets also includes any lease payments made and excludes any lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.
Source: Item 23 — RECEIPTS (FDD pages 86–280)
What This Means (2025 FDD)
According to Epcon Communities' 2025 Franchise Disclosure Document, operating leases are a part of the company's consolidated balance sheets. Epcon Communities recognizes operating lease right-of-use (ROU) assets, net, and operating lease liabilities within its consolidated balance sheets. These ROU assets signify the company's entitlement to utilize an asset for the duration of the lease, while the lease liabilities represent the company's obligation to make lease payments.
Epcon Communities recognizes operating lease ROU assets and operating lease liabilities at the lease commencement date. This recognition is based on the present value of lease payments expected over the lease term. When available, the company uses the implicit rate to determine this present value. However, if the implicit rate is not readily determinable in the lease, Epcon Communities utilizes the risk-free rate as a practical expedient to calculate the present value of lease payments.
The operating lease ROU assets also encompass any lease payments already made, while excluding any lease incentives received. Epcon Communities recognizes lease expenses for lease payments on a straight-line basis throughout the lease term. It’s also noted that the company's lease terms might include options to extend or terminate the lease, which are taken into account when it is reasonably certain that the company will exercise these options.