Which Accounting Standards Update 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 Accounting Standards Update No. 2014-09, 2016-08, 2016-10, 2016-12 and 2016-20, which are collectively implemented as FASB Accounting Standards Codification ("ASC") Topic 606 ("ASC 606"). This update provides guidance for revenue recognition from contracts with customers.
ASC 606's core principle dictates that Itan recognizes revenue when it transfers promised goods or services to customers. The revenue amount should reflect the consideration (payment or value) that Itan expects to receive in exchange for those goods or services. This means that Itan must carefully assess and document when the transfer of goods or services occurs and how the consideration is determined.
Itan also follows Accounting Standards Update 2021-02 "Franchisors - Revenue from Contracts with Customers". This update provides a practical way for franchisors to account for certain pre-opening services as distinct from the franchise license itself. This allows Itan to recognize revenue for these services separately, potentially impacting the timing and amount of revenue recognized compared to treating them as part of the overall franchise agreement.