How does Petro Stopping Center depreciate the right-of-use asset?

According to Petro Stopping Center's 2025 Franchise Disclosure Document, the right-of-use asset is typically depreciated on a straight-line basis over the lease term. This means that the cost of the asset is spread evenly over the duration of the lease, with the same amount of depreciation expense recognized in each period. The right-of-use asset is recognized on the balance sheet as property, plant, and equipment at a value equivalent to the initial measurement of the lease liability, adjusted for lease prepayments, lease incentives, initial direct costs, and any restoration obligations.

The depreciation charge is recognized in the income statement, except where it is capitalized as exploration, appraisal, or development expenditure. Additionally, Petro Stopping Center assesses right-of-use assets for impairment, aligning with the accounting policy for impairment of property, plant, and equipment, intangible assets, and goodwill. This assessment ensures that the asset's value is not overstated on the balance sheet.

For a prospective franchisee, this means that the cost of using the property will be recognized as a depreciation expense over the lease term, impacting the profitability reported in the income statement. Understanding the lease term and the initial measurement of the lease liability is crucial for forecasting future financial performance. Furthermore, the potential for impairment should be considered, as this could lead to a write-down of the asset's value and a corresponding expense.