What accounting standards update was issued in May 2014 that Dermani Medspa follows for revenue recognition?

According to Dermani Medspa's 2025 Franchise Disclosure Document, the company adheres to specific accounting standards for revenue recognition. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014‐09, known as Revenue from Contracts with Customers (Topic 606). This ASU, along with subsequent clarifications, replaced most existing revenue recognition guidance in accounting principles generally accepted in the United States of America.

ASU 2014-09 also mandates expanded disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. For Dermani Medspa franchisees, this means that the franchisor follows a standardized approach to recognizing revenue, which is intended to provide a clear and consistent picture of the company's financial performance. This standard affects how franchise fees, royalties, and other revenue streams are accounted for.

Specifically, Dermani Medspa recognizes revenue from franchise fees when the related performance obligations are fulfilled for franchisees. These obligations include initial training, store location assistance, and the provision of intellectual property rights. The revenue from training is recognized upon completion of the initial training, while revenue from store location assistance is recognized when the franchise agreement is signed. The revenue related to intellectual property rights is recognized ratably over the ten-year term of the franchise agreement. Royalty fees are collected weekly based on sales and recognized each week as sales occur.