What accounting standard did All County adopt for revenue recognition?
All_County Franchise · 2025 FDDAnswer from 2025 FDD Document
NOTE 5: CHANGE IN ACCOUNTING POLICY: ADOPTION OF ASC TOPIC 606
The Company adopted Topic 606 Revenue from Contracts with Customers with a date of initial application of January 1, 2020. As a result, the Company has changed its accounting policy for revenue recognition as detailed below. The Company applied Topic 606 using the cumulative effect method ± i.e., by recognizing the cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of equity at January 1, 2020. As stated in Note 2: Summary of Significant Accounting Policies, there was no material impact to any of the line items within the &oPpDn's Statements of Income or Balance Sheets as a result of applying ASC 606 for the fiscal year ended December 31, 2024.
Revenue Recognition and Adoption of ASC 606:
The Company adopted ASC 606 using the modified retrospective method for those contracts which were not substantially completed as of the transition date of January 01, 2020. There was no material impact to any of the line items within tKe &oPpDn's 6tDtePents of Income or Balance Sheets as a result of applying ASC 606 for the fiscal year ended December 31, 2024. Revenue from Contracts with Franchisee Revenue is recognized when control of the promised services is trDnsIerred to tKe &oPpDn's IrDnFKisees in Dn amount that reflects the consideration expected to be entitled to in exchange for those services.
Revenue from sales of individual franchises is recognized and earned for the initial non-recurring and non-refundable fee upon execution of the agreement with the franchisee whenever allowable under applicable state laws. The initial franchise fee is generally recognized ³ZKen DOO material services or conditions relating to the sale have been substantially perIorPed or sDtisIied E\ tKe IrDnFKisor´ (typically, upon the opening of the franchise location).
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to All County's 2025 Franchise Disclosure Document, the company adopted ASC Topic 606, Revenue from Contracts with Customers, with an initial application date of January 1, 2020. This change in accounting policy for revenue recognition is detailed in the document. All County applied Topic 606 using the cumulative effect method, adjusting the opening balance of equity on January 1, 2020, to reflect the cumulative effect of the new standard.
All County used the modified retrospective method for contracts not substantially completed as of January 1, 2020. The FDD states that the adoption of ASC 606 did not have a material impact on the company's Statements of Income or Balance Sheets for the fiscal year ended December 31, 2024. Revenue from contracts with franchisees is recognized when control of the promised services is transferred to the franchisees, reflecting the consideration expected in exchange for those services.
For a prospective franchisee, this means that All County has updated its revenue recognition policies to comply with current accounting standards. While the adoption of ASC 606 did not have a material impact on All County's financial statements, it's essential to understand how revenue is recognized, especially concerning initial franchise fees and ongoing royalties. The initial franchise fee is recognized when all material services or conditions relating to the sale have been substantially performed or satisfied by the franchisor, typically upon the opening of the franchise location.