What criteria must Bombs Away meet to recognize revenue when persuasive evidence of an arrangement exists?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
Revenues are primarily derived from franchise fees (one-time and recurring monthly fees). In accordance with Accounting Standards Codification (ASC) Topic 606, Revenue will be recognized when persuasive evidence of an arrangement exists, delivery has occurred, or services have been rendered, the seller's price to the buyer is fixed or determinable, and collectability is reasonable assured. The determination of whether fees and fixed or determinable and collection is reasonable assured involves the use of assumptions. Arrangement terms and customer information are evaluated to ensure that these criteria are met prior to recognition of revenue.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the company recognizes revenue primarily from franchise fees, both one-time and recurring monthly fees. Bombs Away follows Accounting Standards Codification (ASC) Topic 606 for revenue recognition.
Specifically, Bombs Away will recognize revenue when several criteria are met. First, there must be persuasive evidence of an arrangement. Second, delivery must have occurred, or services must have been rendered. Third, the price to the buyer must be fixed or determinable. Finally, collectability must be reasonably assured.
Bombs Away's determination of whether fees are fixed or determinable and whether collection is reasonably assured involves making assumptions. To ensure these criteria are met before recognizing revenue, Bombs Away evaluates arrangement terms and customer information.