-AFAR- CSD - 06 Franchise Accounting.pdf

05 Franchise Accounting AFAR By CSD AFAR BY CSD AFAR BY CSD Franchise Accounting License STEP 2: Identify the Performance STEP 3: Determine the...

05 Franchise Accounting AFAR By CSD AFAR BY CSD AFAR BY CSD Franchise Accounting License STEP 2: Identify the Performance STEP 3: Determine the Transaction Price FRANCHISE ACCOUNTING is one that “establishes a customer’s Obligations TP = Initial Franchise Fee rights to the intellectual property (IP) of Performance Obligation/s: the consideration for establishing the an entity.” 1. Not distinct franchise relationship and initial services Examples of licenses of IP: 2. Distinct Non-refundable upfront fees (down) 1. Software, technology; 1. separate utility Added to TP (allocated to POs) 2. Motion pictures, music, media 2. separately identifiable Recorded as unearned revenue 3. Franchises; and *if silent = distinct until PO is satisfied 4. Patents, trademarks, copyrights Examples of Performance Obligations: Note: evaluate whether a significant STEP 1: Identify the Contract with Customer 1. Right to use/access brand (tradename) financial component exists Contract = Franchise Agreement 2. Equipment, products, other goods If yes = use PV for TP (exclude int) franchisor grants to the franchisee the 3. Services (start-up, training) Interest = unearned interest income rights to sell the franchisor’s products and 4. Etc. (non-exhaustive list) To be amortized using effective use its name for a specified period interest method (table) Also, initial start-up service If