How does Itan handle the accounting for gains or losses when items of property and equipment are sold or retired?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and equipment - Property and equipment are carried at cost. Depreciation is computed using the straight-line method of depreciation over the assets estimated useful lives of five years. Maintenance and repairs are charged to the expense as incurred; major renewals and betterments are capitalized. When items of property and equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in income.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, property and equipment are recorded at cost. Itan uses the straight-line method to depreciate these assets over an estimated useful life of five years. Routine maintenance and repairs are expensed as they occur, while significant renewals and improvements are capitalized, meaning they are added to the asset's value on the balance sheet.
When Itan disposes of property or equipment, whether through sale or retirement, the original cost and the accumulated depreciation are removed from the company's accounts. Any resulting gain or loss from the disposal is then included in Itan's income statement.
For a prospective Itan franchisee, this accounting treatment means that the financial impact of selling or retiring assets will be reflected in the business's income. Gains would increase income, while losses would decrease it. This is a standard accounting practice, ensuring that the financial statements accurately represent the economic reality of asset disposals.