For Benjamin Franklin Plumbing, where are current contract assets included on the consolidated balance sheets?
Benjamin_Franklin_Plumbing Franchise · 2025 FDDAnswer from 2025 FDD Document
ct are met. Contract liabilities consist of initial franchise fees. Initial franchise fees are collected near the execution date of the franchise agreement and recognized on a straight-line basis over the franchise agreement term. The current portion of contract liabilities is included in deferred revenue on the consolidated balance sheets. Long-term contract liabilities are included in other long-term liabilities on the consolidated balance sheets.
AB Assetco LLC and Subsidiaries
Notes to Consolidated Financial Statements (in thousands of dollars)
Years Ended December 31, 2024, 2023 and 2022
Contract assets and liabilities acquired in a business combination are accounted for in accordance with ASU 2021-08 – Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The Company accounts for the acquisition of contract assets and liabilities as if the Company had entered into the original contract at the same date and on the same terms as the seller. Therefore, contract assets and liabilities acquired are recognized at the same amount recorded by the seller.
Source: Item 22 — CONTRACTS (FDD pages 87–88)
What This Means (2025 FDD)
According to Benjamin Franklin Plumbing's 2025 Franchise Disclosure Document, contract assets and liabilities acquired during a business combination are accounted for following ASU 2021-08, which addresses accounting for contract assets and liabilities from contracts with customers. The company accounts for these acquisitions as if it had entered the original contract under the same terms as the seller, recognizing the assets and liabilities at the same amount recorded by the seller.
The document provides information on how contract liabilities are treated. Contract liabilities, which are amounts collected or unconditionally receivable before delivering goods or services, typically relate to billed amounts for obligations not yet fulfilled. These are recognized as revenue once the contract conditions are met. Specifically, initial franchise fees are collected near the franchise agreement's execution date and are recognized on a straight-line basis over the agreement's term.
The current portion of these contract liabilities is included in deferred revenue on the consolidated balance sheets, while long-term contract liabilities are included in other long-term liabilities on the consolidated balance sheets. The FDD does not specify where current contract assets are included on the consolidated balance sheets.