When are revenues recognized for Batteries Plus Bulbs operated stores?
Batteries_Plus_Bulbs Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenues are recognized for Batteries Plus operated stores as products are shipped to the customer. These sales are paid for at the time of sale primarily in cash or credit card. Remaining sales are made on account with the vast majority of customers having payment terms of 30 days. Revenues are recognized by Ascent as products are shipped to franchised stores. At shipment, on a common carrier, the franchise obtains control of the product. The majority of variable consideration in the Company's contracts include a form of rebates, discounts, and returns which are not constrained. However, within the context of the contract, these are not considered to be a material right as they are offered as a standard provision in the majority of contracts. Sales rebates and discounts are recorded at the time of sale. There is no provision for estimated returns as these are considered to be immaterial over the 30-day return period. The Company only offers an assurance type warranty on products sold, and there is not material service to the customer beyond fixing defects that existed at the time of sale. No warranties are sold separately and there are no extended warranties. The transaction price includes merchandise sales and is based upon a standalone selling price.
The Company records shipping revenue as an offset to shipping expense as a fulfillment activity as the shipping and handling activities are performed before the customer obtains control of the good.
Source: Item 21 — Financial Statements (FDD pages 79–80)
What This Means (2025 FDD)
According to Batteries Plus Bulbs's 2025 Franchise Disclosure Document, revenues for Batteries Plus Bulbs operated stores are recognized when products are shipped to the customer. The majority of these sales are paid at the time of the transaction, typically through cash or credit card. The remaining sales are made on account, with most customers having payment terms of 30 days.
Batteries Plus Bulbs also addresses variable considerations such as rebates, discounts, and returns. These are generally not considered material rights within the contract, as they are standard provisions. Sales rebates and discounts are recorded at the time of the sale. The company does not maintain a provision for estimated returns, as these are considered immaterial over the 30-day return period. The company only offers an assurance-type warranty on products, with no separate or extended warranties sold. The transaction price includes merchandise sales and is based on a standalone selling price.
Shipping revenue is recorded as an offset to shipping expense because the shipping and handling activities occur before the customer gains control of the goods. This accounting practice ensures that revenue recognition aligns with the transfer of control to the customer, which is a standard accounting principle. For a prospective franchisee, this means understanding that revenue is recognized upon shipment, and managing accounts receivable effectively is crucial for maintaining healthy cash flow.