This April 2021 edition expands on our existing ASC 606 guidance for franchisors to incorporate insights on the adoption of ASU 2021-02, which simplifies how private company franchisors analyze certain activities when determining their performance obligations in a franchise agreement.
Applicability
- Companies with franchisor operations
Key impacts
ASC 606 impacts the following areas:
- Entirely new accounting model that may affect the timing of revenue recognition, in particular for upfront fees
- Sales-based royalties will usually be recognized when franchisee sales occur
- Performance obligations are the new unit of account. Upfront activities and ongoing goods or services to franchisees may be affected
- Accounting for advertising fund contributions and expenses will change for most franchisors
- New framework for assessing franchise contracts modifications and transfers
Download from KPMG Financial Reporting View