What is the title of the Accounting Standards Update (ASU) that Chocolate Bash adopted?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
Specifically for franchisors, The Financial Accounting Standards Board (FASB) has issued an Accounting Standards Update (ASU) to ASC 606, Franchisors—'Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient' in 2021 which provides a new practical expedient that permits private company franchisors to account for preopening services provided to a franchisee as distinct from the franchise license if the services are consistent with those included in a predefined list within the guidance. The Company has elected to adopt this new standard.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 38)
What This Means (2024 FDD)
According to the 2024 Chocolate Bash Franchise Disclosure Document, Chocolate Bash adopted an Accounting Standards Update (ASU) to ASC 606. The title of this update is Franchisors—'Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient'. This update was issued by The Financial Accounting Standards Board (FASB) in 2021.
This update provides a practical way for private company franchisors to account for preopening services provided to a franchisee. It allows them to treat these services as distinct from the franchise license if the services align with a predefined list within the guidance. Chocolate Bash has chosen to adopt this new standard.
For a prospective Chocolate Bash franchisee, this accounting change primarily affects how Chocolate Bash recognizes revenue related to the initial franchise fee. By adopting this standard, Chocolate Bash can now recognize revenue from certain pre-opening services separately from the franchise license, potentially impacting the timing of revenue recognition and the presentation of financial statements. This may provide a clearer picture of the franchisor's revenue streams and the value of the pre-opening support services offered.