Under what accounting standard does Batteries Plus Bulbs recognize revenue?
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.
Franchise, Royalty, Marketing Fund, and Other Fees
Batteries Plus enters into individual and multiple-unit franchise agreements. Individual franchise agreements grant the individual the right to open and operate a franchise store in the franchisee's individual territory. Multiple-unit franchise agreements grant the franchisee the right to establish and own a specified number of Batteries Plus stores within a defined geographic area pursuant to a development schedule. The fees for the individual franchise agreement and a portion of the fees for the multiple-unit franchise agreement are payable upon execution of the agreement and are nonrefundable. The remaining fees for multiple-unit franchise agreements are payable upon execution of the franchise agreement for each store developed pursuant to the multiple unit franchise agreement.
Source: Item 21 — Financial Statements (FDD pages 79–80)
What This Means (2025 FDD)
According to Batteries Plus Bulbs's 2025 Franchise Disclosure Document, revenue recognition depends on whether the sales are from Batteries Plus Bulbs operated stores or from Ascent, the supply chain for Batteries Plus Bulbs. For Batteries Plus Bulbs operated stores, revenue is recognized when products are shipped to the customer. These sales are typically paid for at the time of sale using cash or credit card. Some sales are made on account, with most customers having payment terms of 30 days. For Ascent, revenue is recognized when products are shipped to franchised stores, with the franchise obtaining control of the product upon shipment by a common carrier.
Variable considerations such as rebates, discounts, and returns are generally included in the contracts but are not considered material rights. Sales rebates and discounts are recorded at the time of sale. The company does not provide for estimated returns, as these are considered immaterial over the 30-day return period. Warranties offered are assurance-type warranties covering defects at the time of sale, 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 treatment affects how Batteries Plus Bulbs presents its financial performance, as shipping revenues reduce the reported shipping expenses. Franchise fees from individual and multiple-unit franchise agreements are recognized differently. Fees for individual franchise agreements and a portion of fees for multiple-unit agreements are payable upon execution and are nonrefundable. The remaining fees for multiple-unit agreements are payable upon execution of each store's franchise agreement under the development schedule.