What determines when Brightstar Care considers a customer to have obtained control of a good or service?
Brightstar_Care Franchise · 2025 FDDAnswer from 2025 FDD Document
Under ASC 606, Revenue from Contracts with Customers, the Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. The Company recognizes revenue only when it satisfies a performance obligation by transferring a promised good or service to the customer. The good or service is considered to be transferred when the customer obtains control, meaning when the customer has the ability to direct the use and obtain substantially all of the remaining benefits of the good or service. At each contract inception, the Company determines whether control of a good or service transfers to a customer over time or at a point in time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 117)
What This Means (2025 FDD)
According to Brightstar Care's 2025 Franchise Disclosure Document, the company adheres to specific criteria for revenue recognition, particularly concerning when a customer is deemed to have obtained control of a good or service. Brightstar Care recognizes revenue when it satisfies a performance obligation by transferring a promised good or service to the customer.
Brightstar Care considers a good or service to be transferred when the customer obtains control. Control is defined as the point when the customer has the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from it. At the inception of each contract, Brightstar Care determines whether the transfer of control occurs over a period of time or at a specific point in time.
This approach aligns with accounting standards (ASC 606) that emphasize the importance of identifying performance obligations and recognizing revenue when those obligations are fulfilled by transferring control to the customer. For a Brightstar Care franchisee, this means understanding the terms of service contracts and when the benefits of those services are effectively transferred to the customer, impacting how and when revenue is recognized for accounting purposes.