What approach did the Gokhale Method use when adopting the new revenue recognition standard?

The Company adopted ASU 2014-09, Revenue from Contracts with Customers, and the subsequent amendments to the initial guidance, effective January 1, 2020. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

New Accounting Pronouncement Not Yet Effective

The Company utilizes the allowance method of accounting for doubtful accounts. The allowance is based on management's review of all past due accounts. As of December 31, 2021 and 2020, management believes that all receivables are collectable after year end.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers (Topic 606)". The ASU and all subsequently issued clarifying ASUs replaced most existing revenue recognition guidance in U.S. GAAP. The ASU also required expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the new standard effective January 1, 2020, the first day of the Company's fiscal year, using the modified retrospective approach. The adoption of this standard did not have a material impact on the Company's financial statements.

Pursuant to ASC 606, revenues are recognized upon applying the following steps:

• Identification of the contract(s) with a customer;
• Identification of the performance obligations in the contract;
• · Determination of the transaction price;
• · Allocation of the transaction price to performance obligations in the contract;
• · Recognition of revenues when, or as, the contractual obligations are satisfied.

Nature of products and services: The Company derives its revenues primarily from royalties and franchise fees.

Royalty revenue pertains to a pre-determined amount or percentage for each course taught based on the type of course taught and the number of participants. For royalty, revenue is recognized when students participate in the class. For many of these classes, the payment is processed or collected by GME or the teacher. If the payment is collected by GME, the royalties due to GMI on these classes are periodically remitted to GMI by GME. If the payment is collected by the teacher, GMI will create an invoice for the net royalty.

Source: Item 22 — CONTRACTS (FDD page 34)