How are major renewals and betterments handled for Itan's property and equipment?
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. The document states that depreciation is calculated using the straight-line method over an estimated useful life of five years for the assets.
The FDD specifies that routine maintenance and repairs are expensed as they are incurred. However, major renewals and betterments, which significantly improve the asset or extend its useful life, are capitalized. This means that instead of being immediately expensed, the cost is added to the asset's book value and depreciated over its remaining useful life.
When property and equipment are sold or retired, Itan removes the original cost and accumulated depreciation from its accounts. Any resulting gain or loss from the sale or retirement is then included in the company's income statement for that period.