What is the estimated useful life in years for Management Recruiters' purchased software?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
ars ended December 31, 2022 and December 31, 2021, respectively.
Note 10 – Intangible Assets
The following table reflects our intangible assets (in thousands except useful life):
| December 31, 2022 | December 31, 2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Estimated useful life (in years) | Gross | Accumulated amortization Net | Gross | Accumulated amortization | Net | |||||
| Finite-lived intangible assets: | ||||||||||
| Franchise agreements | 15 | $ | 25,556 | $ | (2,413) | $ | 23,144 | $ 19,916 | $ (1,068) $ | 18,848 |
| Customer lists | 10 | - | - | - | 227 | (227) | - | |||
| Purchased software | 7 | 3,200 | (571) | 2,629 | 3,200 | (114) | 3,086 | |||
| Internally developed software | 5 | 2,294 | (38) | 2,256 | 916 | - | 916 | |||
| Total finite-lived intangible assets | $ | 31,050 | $ | (3,022) | $ | 28,028 | $ 24,259 | $ (1,409) $ | 22,850 | |
| Indefinite-lived intangible assets: | ||||||||||
| Domain name | Indefinite | $ | 2,226 |
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 65–66)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, the estimated useful life for purchased software is 7 years. This means that Management Recruiters amortizes the cost of the software over a 7-year period for accounting purposes. Amortization is a method of spreading the cost of an intangible asset over its useful life.
For a prospective franchisee, this indicates that the cost of any software purchased will be recognized as an expense over 7 years rather than all at once in the year of purchase. This can impact the franchisee's financial statements, particularly their profit and loss statements, by spreading the expense over multiple years. This also applies to internally developed software, which has an estimated useful life of 5 years.
It's important to note that these are estimated useful lives, and the actual useful life of the software could be different. Additionally, Management Recruiters' capitalization and assessment of recoverability of development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, technological and economic feasibility, and estimated economic life.