How does Expense Reduction Analysts account for renewals and betterments that extend the useful lives of assets?
Expense_Reduction_Analysts Franchise · 2025 FDDAnswer from 2025 FDD Document
Maintenance and repairs are charged to expense as incurred. Renewals and betterments which extend the useful lives of the assets are capitalized. The cost and accumulated depreciation related to assets sold or retired are removed from the accounts, and any gain or loss is reflected in operations.
The Company periodically evaluates its long-lived assets for financial impairment. Impairment losses are recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed to not be recoverable. If events or circumstances were to indicate that any of the Company's long-lived assets might be impaired, the Company would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In addition, the Company may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value of the asset. Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset. There were no impairments of long-lived assets at December 31, 2024 and 2023.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Software Development Costs
The Company accounts for capitalized software costs in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350-40 Internal-Use Software. Certain costs incurred only during the application development stage such as coding, configuration, and customization are required to be capitalized. Alternatively, costs during the preliminary project and post-implementation stages, such as planning and training, are expensed. Amortization of capitalized software development costs begins when the software is ready for its intended use. Software development costs are amortized using the straight-line method with useful lives of 10 years, which represents the estimated economic life of the software.
Source: Item 23 — RECEIPTS (FDD pages 58–215)
What This Means (2025 FDD)
According to Expense Reduction Analysts' 2025 Franchise Disclosure Document, the company's accounting policy is to charge maintenance and repairs to expense as they are incurred. However, renewals and betterments that extend the useful lives of the assets are capitalized. When assets are sold or retired, their cost and accumulated depreciation are removed from the accounts, and any gain or loss is reflected in operations.
Expense Reduction Analysts also evaluates its long-lived assets for financial impairment periodically. If the carrying amount of an asset is deemed unrecoverable, impairment losses are recognized for assets to be disposed of or held for use. The company assesses recoverability based on the estimated undiscounted future cash flows to be generated from the asset. An impairment loss may also be recorded if the carrying value of the asset exceeds its fair value, which is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset.
For software development costs, Expense Reduction Analysts follows Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350-40 Internal-Use Software. Costs incurred during the application development stage, such as coding, configuration, and customization, are capitalized. Costs during the preliminary project and post-implementation stages, such as planning and training, are expensed. Amortization of capitalized software development costs begins when the software is ready for its intended use and is amortized using the straight-line method with useful lives of 10 years, representing the estimated economic life of the software.