How does Aw recognize revenue related to performance obligations?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
pass through directly to the members' and is reported on their individual income tax returns.
3. REVENUE RECOGNITION
The Company records revenue in accordance Accounting Standards Board ("FASB") and Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). The transaction price attributable to performance obligations are recognized as the performance obligations are satisfied. The portion of the franchise fee, if any, that is not attributable to a distinct performance obligation are amortized over the life of the related franchise agreements. The company adopted ASC-606 and ASU 2021-02 using the modified retrospective method starting with January 1, 2020. Upon adoption, the Company recorded deferred revenue, and a cumulative effect to decrease accumulated retained earnings by $58,500 on our Balance Sheet for the unamortized portion of fees received on behalf of the then operating franchise agreements.
RAYYAN PIZZA FRANCHISE LLC NOTES TO FINANCIAL STATEMENTS
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**4.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, the company adheres to Accounting Standards Board (FASB) and Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606) for revenue recognition. This means Aw recognizes revenue as it fulfills its obligations under the franchise agreement. The transaction price tied to these performance obligations is recognized once those obligations are satisfied. If any portion of the franchise fee isn't directly linked to a specific performance obligation, Aw amortizes that part over the duration of the franchise agreement.
Aw adopted ASC-606 and ASU 2021-02 using the modified retrospective method starting January 1, 2020. Upon adoption, the company recorded deferred revenue, and a cumulative effect to decrease accumulated retained earnings by $58,500 on our Balance Sheet for the unamortized portion of fees received on behalf of the then operating franchise agreements.
Additionally, Aw records non-refundable franchise fees, net of amounts earned based on allowable direct services, as deferred revenues. These deferred revenues are then recognized over the life of the franchise agreement. As of December 31, 2024, and 2023, the non-refundable franchise fees received but not yet earned were $17,500 and $25,500, respectively. This accounting practice ensures that Aw recognizes revenue in alignment with the services and benefits it provides to franchisees over the term of the agreement.