When items of property and equipment are sold or retired, how does Itan handle the related cost and accumulated depreciation?
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, the company carries property and equipment at cost and depreciates it using the straight-line method over an estimated useful life of five years. Routine maintenance and repairs are expensed as incurred, while significant renewals and improvements are capitalized, meaning their costs are added to the asset's value and depreciated over time.
When Itan disposes of property or equipment, either through sale or retirement, the original cost and any accumulated depreciation related to the asset are removed from the company's accounts. This ensures that the balance sheet accurately reflects the remaining assets and their current book value.
Any resulting gain or loss from the disposal—calculated as the difference between the asset's book value (original cost less accumulated depreciation) and the proceeds received (if sold)—is then included in Itan's income statement. This approach is standard accounting practice, ensuring that the financial statements reflect the economic impact of asset disposals on the company's profitability.