Under ASC 606, when does Advanced Mobile Iv And Amiv recognize revenue?
Advanced_Mobile_Iv_And_Amiv Franchise · 2023 FDDAnswer from 2023 FDD Document
ficant property and equipment categories are as follows:
Website 5 years Furniture and fixtures 5 years Leasehold improvements Lesser of the useful life or lease term
NOTES TO THE FINANCIAL STATEMENTS December 31, 2022
(g) Revenue Recognition
The Company's revenues consist of initial franchise fees and ongoing royalties based on a percentage of gross revenues.
Upon inception, the Company adopted ASC 606, Revenue from Contracts with Customers. ASC 606 provides that revenues are to be recognized when control of promised goods or services is transferred to a customer in an amount that reflects the considerations expected to be received for those goods or services. In implementing ASC 606, the Company evaluated all revenue sources using the five-step approach: identify the contract, identify the performance obligations, determine the transaction price, allocate the transaction price, and recognize revenue.
For each franchised location, the Company enters into a formal franchise agreement that clearly outlines the transaction price, which includes an initial fee and ongoing royalties, marketing fees, and technology fees, and the Company's performance obligations. For service revenues, the Company enters into contracts with individual customers and franchisees.
Source: Item 23 — RECEIPTS (FDD pages 54–202)
What This Means (2023 FDD)
According to Advanced Mobile Iv And Amiv's 2023 Franchise Disclosure Document, the company recognizes revenue when control of promised goods or services is transferred to a customer, reflecting the consideration expected to be received. This policy aligns with ASC 606, Revenue from Contracts with Customers. Advanced Mobile Iv And Amiv uses a five-step approach to implement ASC 606, which includes identifying the contract, identifying performance obligations, determining the transaction price, allocating the transaction price, and recognizing revenue.
Specifically, Advanced Mobile Iv And Amiv's revenues consist of initial franchise fees and ongoing royalties based on a percentage of gross revenues. The franchise fees and any corresponding commissions are recognized when the franchisee begins operations. If a franchisee has not yet begun operations by the end of the year, Advanced Mobile Iv And Amiv defers both the revenues and commissions.
For prospective franchisees, this means that Advanced Mobile Iv And Amiv does not recognize revenue from your initial franchise fee until you actually start operating your franchise. This deferral of revenue recognition until operations begin could be seen as a positive aspect, as it aligns Advanced Mobile Iv And Amiv's revenue recognition with the franchisee's actual commencement of business.