What depreciation method does Flowerama use for equipment?

According to Flowerama's 2024 Franchise Disclosure Document, property and equipment are recorded at cost, with depreciation computed using methods and useful lives as determined by the company. For financial reporting purposes, Flowerama uses the straight-line method to depreciate the cost of equipment over its estimated useful life. However, for income tax purposes, the company may use the accelerated cost recovery system or bonus depreciation deductions.

This means that while Flowerama may expense the cost of equipment more quickly for tax benefits, the depreciation expense reported on their financial statements will be spread evenly over the asset's useful life. This difference in depreciation methods creates a temporary difference between the book value and the tax basis of the equipment, which is accounted for as a deferred income tax liability.

For a prospective Flowerama franchisee, understanding the depreciation methods used by the company is important for accurately interpreting their financial statements and assessing their profitability. It also highlights the potential for differences between taxable income and reported income, which can impact tax planning and financial decision-making.