How does Care Plus Medical Ucc account for pre-opening activities that are not brand specific?
Care_Plus_Medical_Ucc Franchise · 2024 FDDAnswer from 2024 FDD Document
ny's intellectual property over the term of each franchise agreement.
The Company estimates the stand-alone selling price of pre-opening activities using an adjusted market assessment approach. The Company will first allocate the initial franchise fees and the fixed consideration, under the franchise agreement to the standalone selling price of the training services that are not brand specific and the residual, if any, to the right to access the Company's intellectual property. Consideration allocated to pre-opening activities, which are not brand specific are recognized ratably as those services are rendered. Consideration allocated to pre-opening activities included under Accounting Standards Update (ASU) to ASC 606, Franchisors—'Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient' is recognized when the related services have been rendered.
The remaining franchisee fee not allocated to pre-opening activities are recorded as Unearned Revenue and will be recognized over the term of the franchise agreement.
Income Taxes
The Company, with the consent of its shareholders, has elected to be an S-Corporation (for tax purposes). In lieu of corporate income taxes, the shareholder(s) of an S-Corporation is taxed based on its proportionate share of The Company's taxable income. Therefore, no provision or liability for income taxes has been included in these financial statements.
Commitments and Contingencies
The Company may be subject to pending legal proceedings and regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome, if any, arising out of any such matter will have a material adverse effect on its business, financial condition or results of operations. As of December 31, 2023, the Company has not reported any lawsuit or known plans of litigation by or against the Company.
CARE PLUS MEDICAL UCC, LLC NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2023
NOTE C – CONCENTRATIONS OF RISK
Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents. The Company places its cash and any cash equivalents with a limited number of high-quality financial institutions and do not exceed the amount of insurance provided on such deposits.
NOTE D – SUBSEQUENT EVENTS
Management has evaluated subsequent events through March 12, 2024, the date on which the financial statements were available to be issued.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 41)
What This Means (2024 FDD)
According to Care Plus Medical Ucc's 2024 Franchise Disclosure Document, the company uses an adjusted market assessment approach to estimate the stand-alone selling price of pre-opening activities. Care Plus Medical Ucc first allocates the initial franchise fees and any fixed consideration under the franchise agreement to the stand-alone selling price of training services that are not brand specific. The residual amount, if any, is then allocated to the right to access the company's intellectual property.
Consideration allocated to pre-opening activities that are not brand specific is recognized ratably as those services are rendered. For pre-opening activities included under Accounting Standards Update (ASU) to ASC 606, Franchisors—'Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient', consideration is recognized when the related services have been rendered. The remaining franchisee fee not allocated to pre-opening activities is recorded as Unearned Revenue and will be recognized over the term of the franchise agreement.
In 2022, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) to ASC 606, Franchisors—'Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient'. This update provides a practical way for private company franchisors to account for preopening services as distinct from the franchise license if the services align with a predefined list within the guidance, which Care Plus Medical Ucc has elected to adopt. Care Plus Medical Ucc expects that certain pre-opening activities provided to the franchisee will not be brand specific and will provide the franchisee with relevant general business information that is separate and distinct from the operation of a company-branded franchise unit. The portion of pre-opening activities that will be provided that is not brand specific is expected to be distinct as it will provide a benefit to the franchisee and is expected not to be highly interrelated or interdependent to the access of the Company's intellectual property, and therefore will be accounted for as a separate distinct performance obligation. All other pre-opening activities are expected to be highly interrelated and interdependent to the access of the Company's intellectual property and therefore will be accounted for as a single performance obligation, which is satisfied by granting certain rights to access the Company's intellectual property over the term of each franchise agreement.