Summary Advanced Accounting: Franchise

Revenue streams of Franchise Agreements:

1. Initial Franchise Fee

Downpayment xx
Value of note xx
a. Interest Bearing = Face Value
b. Non-Interest Bearing = Present Value
Initial Franchise Fee xx
Direct Cost (xx)
Gross Profit – IFF xx

2. Continuing Franchise Fee = % of sales

3. Interest
a. Interest Bearing = Face amount X Nominal Rate
b. Non-Interest Bearing = Carrying value X Effective Rate

IFRS 15:

Step 1: Identify Contract
Step 2: Identify Performance Obligations
Step 3: Determine Transaction Price
Step 4: Allocate Transaction Price to Performance Obligations
(Relative to the Stand-Alone Selling Prices)
Step 5: Recognize Revenue
a. Overtime
b. Point in Time