The Financial Accounting Standards Board released a
When a franchisee business owner opens a new branch of a franchise, the franchise agreement generally requires the franchisor to perform certain pre-opening activities to support the new branch. Those activities may include services such as training or site selection.
FASB’s proposed practical expedient would allow certain pre-opening services listed within the guidance to be accounted for as a single bundled, separate performance obligation, if it is probable that the continuing fees in the franchise agreement would be sufficient to cover the franchisor’s continuing costs plus a reasonable profit.
The International Franchise Association has been pushing FASB for changes to the revenue recognition rules and succeeded in winning a delay of the standard earlier this year for private franchises as part of a larger deferral of various accounting standards in response to the COVID-19 pandemic (
FASB is asking for comments on the