What accounting alternative has Crepe De Licious adopted for revenue recognition?

According to Crepe De Licious's 2025 Franchise Disclosure Document, the company has adopted a private company accounting alternative for revenue recognition. Specifically, Crepe De Licious has elected to use the practical expedient outlined in Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2021-02, Franchisors – Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient. This accounting alternative allows private company franchisors to simplify the process of identifying performance obligations within their contracts with customers.

This practical expedient can be beneficial for Crepe De Licious as it streamlines the revenue recognition process. Instead of meticulously dissecting every aspect of a franchise agreement to pinpoint each performance obligation, the company can use a more simplified approach. This reduces the complexity and potential for error in financial reporting.

For a prospective franchisee, this accounting choice by Crepe De Licious might not have a direct, visible impact on day-to-day operations. However, it reflects that Crepe De Licious is using accounting practices tailored for private companies, which can lead to more straightforward and transparent financial reporting. Franchisees may want to inquire about how this practical expedient affects the presentation and interpretation of financial data provided to them, ensuring they understand how revenue is recognized and reported by the franchisor.