What is the significance of ASC 606 for All Team's revenue recognition?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenue Recognition
The Company maintains its books and prepares its financial statements on the accrual basis of accounting wherein revenue is recognized when earned and invoiced and expenses are recognized when incurred. Furthermore, initial franchise fee income is earned upon execution of the franchise agreement, which is nonrefundable. The Company receives royalties based upon a percentage of annual sales volume of its affiliates and franchisees. Additionally, funding and processing fees are based on a percentage of gross billings.
In 2019, the Company adopted ASC 606, Revenue from Contracts with Customers, which amended the existing accounting standards for revenue recognition. Consequently, the Company recognizes revenue when the services are provided, persuasive evidence of an arrangement exists, the price is fixed and collection is reasonably assured in accordance with ASC 606.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 33)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, the company adopted ASC 606, Revenue from Contracts with Customers, in 2019. This accounting standard amended the existing rules for how All Team recognizes revenue.
As a result of adopting ASC 606, All Team recognizes revenue when services are provided, when there is persuasive evidence of an arrangement, when the price is fixed, and when collection is reasonably assured. This is all done in accordance with ASC 606.
For a prospective All Team franchisee, this means that the franchisor's revenue recognition practices are governed by a specific accounting standard. This standard dictates when and how All Team can record revenue, which can impact the financial statements presented in the FDD. Understanding that All Team follows ASC 606 can give franchisees more confidence in the reported revenue figures, as they adhere to a recognized and regulated accounting principle.