How does Bombs Away account for differences in timing between revenue recognition and invoicing to franchisees?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
The Company's franchisee receivables primarily result from initial franchise fees, royalty fees, brand development contributions and training fees charged to franchisees. Timing of revenue recognition may be different from the timing of invoicing to customers. The Company records an accounts receivable when revenue is recognized prior to invoicing, or unearned revenue when revenue is recognized after invoicing. The Company reports these receivables at net realizable value.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the company addresses potential timing differences between when revenue is earned and when franchisees are invoiced. Bombs Away's franchisee receivables primarily come from initial franchise fees, royalty fees, brand development contributions, and training fees.
Bombs Away records an accounts receivable when revenue is recognized before an invoice is issued. Conversely, if revenue recognition occurs after invoicing, Bombs Away records unearned revenue. This approach ensures that revenue is appropriately accounted for in the correct period, regardless of when the invoice is generated.
This accounting practice is a standard procedure that ensures Bombs Away's financial statements accurately reflect its financial performance. For a prospective franchisee, this means that Bombs Away's financial reporting should provide a clear and reliable picture of the company's revenue streams, as it adheres to standard accounting principles for revenue recognition.