How does Pearce Bespoke assess whether an arrangement qualifies as a lease?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
Leases – The Company has an operating lease for office space. The Company assesses whether an arrangement qualifies as a lease (i.e., conveys the right to control the use of an identified asset for a period of time in exchange for consideration) at inception and only reassesses its determination if the terms and conditions of the arrangement are changed. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized for these leases on a straight-line basis over the lease term. As the lease does not provide an implicit rate, the Company elected to use the riskfree based on the information available at the commencement date in determining the p
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Pearce Bespoke's 2025 Franchise Disclosure Document, the company determines whether an arrangement qualifies as a lease by assessing if it conveys the right to control the use of an identified asset for a specific period in exchange for consideration. This assessment is made at the inception of the arrangement and is only reassessed if the terms and conditions of the arrangement change.
For leases with an initial term of 12 months or less, Pearce Bespoke does not record them on the balance sheet. Instead, the lease expense for these short-term leases is recognized on a straight-line basis over the lease term.
Since the lease does not provide an implicit rate, Pearce Bespoke elected to use the risk-free rate based on available information at the commencement date to determine the present value of lease payments. This approach is consistent with accounting standards for leases where an implicit rate is not readily determinable.