What accounting standards codification topic provides guidance for revenue recognition that Itan follows?
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 Nos. 2014-09, 2016-08, 2016-10, 2016-12 and 2016-20, which are collectively implemented as FASB Accounting Standards Codification (ASC) Topic 606. This ASC 606, titled "Revenue from Contracts with Customers", offers guidelines for how Itan recognizes revenue.
ASC 606's core principle dictates that Itan recognizes revenue when it transfers promised goods or services to its customers. The revenue amount must reflect the consideration (payment) that Itan expects to receive in exchange for those goods or services. This means that the timing of revenue recognition is tied to the actual transfer of goods or services, rather than simply the receipt of cash.
Additionally, Itan follows Accounting Standards Update 2021-02, "Franchisors - Revenue from Contracts with Customers." This update provides a practical approach, allowing qualifying franchisors like Itan to account for certain pre-opening services separately from the franchise license itself. This can simplify the accounting process and provide a more accurate reflection of the value of different components of the franchise offering.
For a prospective Itan franchisee, understanding these accounting standards is crucial. It ensures that both Itan and its franchisees are aligned in how revenue is recognized, which impacts financial reporting and overall business management. Franchisees may want to discuss these standards with their own financial advisors to fully grasp the implications for their individual businesses.