According to Itan's accounting policies, what is the treatment of revenue recognition?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company follows Accounting Standards Update No. 2014-09, 2016-08, 2016-10, 2016-12 and 2016-20, collectively implemented as FASB Accounting Standards Codification ("ASC") Topic 606 ("ASC 606") Revenue from Contracts with Customers, provides guidance for revenue recognition. This ASC's core principle requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects consideration to which the company expects to be entitled in exchange for those goods or services.
The Company follows Accounting Standards Update 2021-02 "Franchisors - Revenue from Contracts with Customers". The ASU provides a practical expedient to allow qualifying franchisors to account for certain pre-opening services as distinct from franchise license.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, the company adheres to specific accounting standards for revenue recognition. Itan follows Accounting Standards Update No. 2014-09, 2016-08, 2016-10, 2016-12 and 2016-20, collectively implemented as FASB Accounting Standards Codification ("ASC") Topic 606 ("ASC 606") Revenue from Contracts with Customers, which provides guidance for revenue recognition.
This standard dictates that Itan recognizes revenue when it transfers promised goods or services to customers. The amount of revenue recognized is based on the consideration (payment) Itan expects to receive in exchange for those goods or services. This means that Itan must carefully assess and determine when the transfer of goods or services occurs and accurately measure the expected payment to properly recognize revenue.
Additionally, Itan follows Accounting Standards Update 2021-02 "Franchisors - Revenue from Contracts with Customers". This update provides a practical way for qualifying franchisors to account for certain pre-opening services separately from the franchise license itself. This allows Itan to recognize revenue for these pre-opening services as distinct items, potentially affecting the timing and amount of revenue recognized compared to treating them as part of the overall franchise license fee.
For a prospective franchisee, understanding these accounting policies is crucial. It ensures transparency in how Itan reports its financial performance, which can influence investment decisions. Franchisees should be aware of how revenue is recognized, as it can impact the franchisor's profitability and financial stability, indirectly affecting the support and services they receive.