What specific Accounting Standards Update number did Aw adopt regarding revenue from contracts with customers?
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
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, the company records revenue in accordance with Accounting Standards Update (ASU) No. 2014-09, titled "Revenue from Contracts with Customers (Topic 606)". Aw recognizes the transaction price as performance obligations are satisfied. If any portion of the franchise fee is not attributable to a distinct performance obligation, it is amortized over the life of the related franchise agreements.
Aw adopted ASC-606 and ASU 2021-02 using the modified retrospective method starting January 1, 2020. Upon adoption, the company recorded deferred revenue, decreasing accumulated retained earnings by $58,500 on the balance sheet for the unamortized portion of fees received on behalf of the then operating franchise agreements.
This means that Aw, like many other franchise systems, follows specific accounting guidelines to ensure revenue is recognized appropriately. For a franchisee, this primarily affects how the franchisor reports its financial performance, which can be an indicator of the franchise system's overall health and stability. Understanding these accounting standards helps potential franchisees interpret the financial statements provided in the FDD.