According to Cicis, what is the first step in revenue recognition?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenue recognition: The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which provides a five-step model for recognizing revenue from contracts with customers as follows:
- Identify the contract with a customer
- Identify the performance obligations in the contract
- Determine the transaction price
- Allocate the transaction price to the performance obligations in the contract
- Recognize revenue when or as performance obligations are satisfied
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 58–64)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, the company adheres to ASC Topic 606, which outlines a five-step model for recognizing revenue from contracts with customers. The initial step in this model is to identify the contract with a customer. This means Cicis must first establish that a valid agreement exists before recognizing any revenue.
The subsequent steps in Cicis's revenue recognition process involve identifying the performance obligations within the contract, determining the transaction price, allocating the transaction price to the performance obligations, and finally, recognizing revenue as these obligations are fulfilled. Each of these steps ensures that revenue is recognized accurately and in accordance with accounting standards.
For a prospective Cicis franchisee, understanding these revenue recognition principles is crucial. It provides insight into how Cicis accounts for its income and ensures transparency in financial reporting. Franchisees can use this information to better understand the financial performance of their own outlets and the overall health of the Cicis franchise system.