When does Management Recruiters account for revenue for owned locations?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
For owned locations, we account for revenue when both parties to the contract have approved the contract, the rights and obligations of the parties are identified, payment terms are identified, and collectability of consideration is probable. Revenue derived from owned locations is recognized at the time we satisfy our performance obligation. Our contracts have a single performance obligation, which is the transfer of services. Because our customers receive and consume the benefits of our services simultaneously, our performance obligations are satisfied when our services are provided. Revenue from owned locations is reported net of customer credits, discounts, and taxes collected from customers that are remitted to taxing authorities. Our customers are invoiced every week and we do not require payment prior to the delivery of service. Substantially all of our contracts include payment terms of 30 days or less and are short-term in nature. Because of our payment terms with our customers, there are no significant contract assets or liabilities. We do not extend payment terms beyond one year.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 65–66)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, revenue from owned locations is recognized when specific conditions are met. These conditions include both parties approving the contract, identifying the rights and obligations of each party, defining payment terms, and establishing the probability of collecting payment. Once these criteria are satisfied, Management Recruiters recognizes revenue at the time they fulfill their performance obligation, which is the transfer of services.
Since Management Recruiters' contracts have a single performance obligation, the transfer of services, and customers simultaneously receive and consume the benefits of these services, the performance obligations are satisfied when the services are provided. The revenue from these owned locations is reported net of customer credits, discounts, and taxes collected from customers that are then remitted to taxing authorities.
Management Recruiters invoices its customers every week and generally does not require payment before the service is delivered. The payment terms are typically short-term, usually 30 days or less. Because of these payment terms, Management Recruiters does not have significant contract assets or liabilities and does not extend payment terms beyond one year.