Navigate Yoozpaper

Yoozpaper Front Page
The Yoozpaper
Yoozer Profile
Profile
Shared Paper
Shared Paper
Create Newspaper
Create Paper
Create Customized Paper
Custom Paper
Create Album
Create Album
Yoozer Notifications
Notifications
Edit Profile
Edit Profile
Login
Login

 
 
 
Login on Yoozpaper Facebook Login

Franchise Fee - Accounting Requirements

Written by on


Franchise Fee - Accounting Requirements


0 YOOZ this

What accounting requirements exist?

o Unearned franchise fees are recorded at present value. Where a part of the initial fee constitutes a nonrefundable amount for services already performed, revenue should be accordingly recognized.
o The initial franchise fee is not typically allocated to specific franchisor services before all services are performed. This practice can only be done if actual transaction prices are available for individual services.
o If the franchisor sells equipment and inventory to the franchisee at no profit, a receivable and payable is recorded. No revenue or expense recognition is given.
o In the case of a repossessed franchise, refunded amounts to the franchisee reduce current revenue. If there is no refund, the franchisor books additional revenue for the consideration retained which was not previously recorded. In either situation, prospective accounting treatment is given for the repossession.
o Indirect costs of an operating and recurring nature are expensed immediately. Future costs to be incurred are accrued no later than the period in which related revenue is recognized. Bad debts applicable to expected uncollectability of franchise fees should be recorded in the year of revenue recognition.
o Installment or cost recovery accounting may be employed to account for franchisee fee revenue only if a long collection period is involved and future uncollectability of receivables cannot be accurately predicted.

Footnote disclosure is required of:
o Outstanding obligations under agreement.
o Segregation of franchise fee revenue between initial and continuing.

Note that these costs are not to be netted as a reduction of cost.

A good book to read is The Vest Pocket CPA, written by Joel G. Siegel, Nick A. Dauber, and Jae K. Shim. This book can be found on Amazon and Amazon Kindle.

Return to CPA Review.





Yoozpaper is a social network of online newspapers written by individuals or groups. Yoozpaper takes free articles that members write and formats them as an online newspaper.

Articles Of The Week

Characteristic Refractory Material MudMixingMethod

The use of silicon carbide