According to Epcon Communities, what is revenue recognized in an amount that reflects?

According to Epcon Communities' 2025 Franchise Disclosure Document, revenue is recognized when a performance obligation has been satisfied by transferring control of promised products or services to customers. The revenue amount reflects the consideration that Epcon Communities expects to receive in exchange for those products or services. This is a standard accounting practice, ensuring that revenue is recorded when it is earned and realized.

For Epcon Communities, contracts may include a mix of products and services, which are treated as separate performance obligations if they are distinct. Specifically, the company identifies the licensing of intellectual property (franchise fees and royalties) and advertising services as separate performance obligations. The transaction price is allocated to these obligations based on their relative standalone selling prices (SSP). Epcon Communities determines SSP based on observable standalone selling prices, market conditions, and other relevant factors.

Initial franchise fees are recognized over the expected life of the franchise agreement, which is approximately four years. This means that the initial fee is deferred and recognized on a straight-line basis over the four-year term. Royalty income, on the other hand, is recognized when the franchisee completes the sale of a home. Advertising services are recognized as they are delivered, based on the costs incurred. Conference fees, charged for the annual conference, are recognized when the conference is held. This detailed approach to revenue recognition ensures compliance with accounting standards and provides transparency into how Epcon Communities earns its revenue.