What depreciation method does Precision Door Service use for property and equipment?
Precision_Door_Service Franchise · 2025 FDDAnswer from 2025 FDD Document
ensive Income (Loss). This is separate from MAP fees which are presented on their own line in Consolidated Statements of Operations and Comprehensive Income (Loss).
Inventories
Inventories consist of products to be sold and are stated at the lower of cost (first-in, first-out method) or net realizable value.
Property and Equipment
With the exception of land, which is not depreciated, property and equipment is stated at cost and is depreciated using the straight-line method over the estimated useful lives of the respective assets which are generally as follows: buildings (30 years) and building improvements (5-15 years), capped at the lesser of life of the leasehold improvements or remaining lease life; machinery, equipment, and vehicles (5-10 years); furniture and fixtures (5 years); and hardware and software (3 years). Additions, renewals, and betterments are capitalized; maintenance and repairs which do not extend the useful life of the asset are expensed as incurred.
Source: Item 21 — Financial Statements (FDD page 91)
What This Means (2025 FDD)
According to Precision Door Service's 2025 Franchise Disclosure Document, the company uses the straight-line method to depreciate its property and equipment. Land is the exception, as it is not depreciated. The estimated useful lives of the assets are as follows: buildings are depreciated over 30 years, building improvements over 5 to 15 years (capped at the lease life for leasehold improvements), machinery, equipment, and vehicles over 5 to 10 years, furniture and fixtures over 5 years, and hardware and software over 3 years.
For a prospective franchisee, this means that Precision Door Service expenses the cost of its assets evenly over their useful life. This method is commonly used because of its simplicity and ease of calculation. It's important to note that additions, renewals, and betterments to the assets are capitalized, meaning their costs are added to the asset's book value and depreciated over their remaining useful life. Regular maintenance and repairs that do not extend the asset's life are expensed as they are incurred.
Precision Door Service also evaluates its long-lived assets for impairment when there are indicators suggesting that the asset's value may be less than its carrying amount. If the estimated undiscounted cash flows from the asset are less than its carrying amount, an impairment loss is recorded to reduce the asset's value to its fair market value. This indicates that Precision Door Service management actively monitors the value of its assets and adjusts its financial statements accordingly.