What accounting standard did Focus Cfo implement a change in during 2024 related to revenue recognition?
Focus_Cfo Franchise · 2025 FDDAnswer from 2025 FDD Document
During 2024, the Company implemented a change in accounting principle related to the recognition of revenue from the sale of franchises and licenses in accordance with ASC 606. Previously under the ASC, the Company determined there was only one performance obligation under the franchise and license agreement which was the completion of an initial training by the new franchisee/licensee. The Company therefore previously recognized revenue from the sale of a franchise or license once the initial training had been completed by the franchisee/licensee. The initial training was required to be completed within two weeks of the signing of the agreement. The Company determined due to changes in the franchise and license agreements in 2023 that there are now two performance obligations: 1) providing an initial training program for new franchisees/licensees and 2) ongoing support of the FocusCFO System and FocusCFO Resources during the term of the agreement. Therefore, the portion of the fee under the agreement allocated to training is recognized as revenue within two days of executing their agreement when the training program is made available to the franchisee/licensee. The portion of the fee under the agreement that is allocated to the initial franchise/license fee is recognized as revenue over the duration of the agreement which is 10 years.
Source: Item 23 — Receipts (FDD pages 37–126)
What This Means (2025 FDD)
According to the 2025 Focus Cfo Franchise Disclosure Document, during 2024, Focus Cfo implemented a change in accounting principle related to revenue recognition from the sale of franchises and licenses. This change was made in accordance with ASC 606.
Previously, Focus Cfo recognized revenue from the sale of a franchise or license once the initial training was completed by the new franchisee/licensee, as they determined there was only one performance obligation under the franchise and license agreement. The initial training was required to be completed within two weeks of signing the agreement.
However, due to changes in the franchise and license agreements in 2023, Focus Cfo determined that there are now two performance obligations: providing an initial training program and ongoing support of the FocusCFO System and FocusCFO Resources during the term of the agreement. As a result, the portion of the fee allocated to training is recognized as revenue within two days of executing the agreement when the training program is made available. The portion of the fee allocated to the initial franchise/license fee is recognized as revenue over the 10-year duration of the agreement.