What is the full title of the accounting standards update (ASU) referenced by Desi District?

According to Desi District's 2024 Franchise Disclosure Document, the accounting standards update (ASU) referenced is titled 'Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient'. This update to ASC 606, issued by the Financial Accounting Standards Board (FASB) in 2022, provides a practical way for private company franchisors to account for preopening services provided to a franchisee. Desi District has elected to adopt this new standard.

This accounting standard allows Desi District to treat pre-opening services as distinct from the franchise license under certain conditions. Specifically, if the pre-opening services are consistent with a predefined list within the guidance, they can be accounted for separately. This means that Desi District can recognize revenue from these services as they are rendered, rather than over the entire term of the franchise agreement.

For a prospective franchisee, this accounting treatment is important because it affects how Desi District recognizes revenue and reports its financial performance. Understanding that Desi District has adopted this standard can provide insight into how the franchisor accounts for initial franchise fees and pre-opening activities, which are key components of the franchise agreement. It also highlights the franchisor's compliance with current accounting standards, which can be a factor in assessing the financial stability and transparency of the franchise system.