ASC

ASC 605-952

Franchisors

605 Revenue Recognition

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In brief

IntroductoryRevenueIndustry-specificTransition and effective datesRecognition

ASC 605-952 formerly contained the industry-specific revenue recognition guidance for franchisors (initial franchise fees, area franchise sales, continuing fees, and related disclosures). Every paragraph in the subtopic — Sections 05, 15, 25, 35, 40, 45, and 50 — has been superseded by ASU 2014-09 (Revenue from Contracts with Customers). Franchisors now apply ASC 606 (with ASC 340-40 for contract costs), including the franchisor-specific implementation guidance and, for private companies, the practical expedient added by ASU 2021-02.

Key points (5)
  • Every paragraph of this subtopic, including 605-952-05-1, 605-952-15-1, 605-952-25-1 through 25-17, 605-952-35-1, 605-952-40-1, 605-952-45-1, and 605-952-50-1 through 50-3, is marked 'Paragraph superseded by Accounting Standards Update No. 2014-09.'
  • Because no substantive text remains, the subtopic imposes no current recognition, measurement, derecognition, presentation, or disclosure requirements on franchisors.
  • The legacy model this subtopic carried forward (from FAS 45) recognized initial franchise fees only when substantially all initial services had been performed; that model no longer applies under GAAP.
  • Franchisors must instead apply the five-step model in ASC 606-10 to franchise agreements, identifying performance obligations and allocating the transaction price, and apply ASC 340-40 to incremental costs of obtaining and costs to fulfill a contract.
  • Legacy 605 guidance may still be relevant only for historical financial statements or comparative periods presented before the ASU 2014-09 effective date.

For students. This subtopic is a shell: its only teaching point is that franchisor-specific revenue rules were eliminated by ASU 2014-09 and replaced by the general ASC 606 model. The common mistake is citing the old 'substantially all initial services performed' test for initial franchise fees, which is no longer authoritative.

superseded guidancefranchisor revenueinitial franchise feecontinuing franchise feerevenue from contracts with customersindustry-specific revenue guidancetransition to asc 606

Machine-generated study aid for ASC 605-952. Check the source paragraphs below.

605-952-00Status

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605-952-00-1
The following table identifies the changes made to this Subtopic.
Paragraph Action Accounting Standards Update Date
Area Franchise Superseded Accounting Standards Update No. 2014-09 05/28/2014
Bargain Purchase Superseded Accounting Standards Update No. 2014-09 05/28/2014
Continuing Franchise Fees Superseded Accounting Standards Update No. 2014-09 05/28/2014
Franchise Agreement Superseded Accounting Standards Update No. 2014-09 05/28/2014
Franchisee Superseded Accounting Standards Update No. 2014-09 05/28/2014
Franchisor Superseded Accounting Standards Update No. 2014-09 05/28/2014
Initial Franchise Fee Superseded Accounting Standards Update No. 2014-09 05/28/2014
Initial Services Superseded Accounting Standards Update No. 2014-09 05/28/2014
952-605-05-1 Superseded Accounting Standards Update No. 2014-09 05/28/2014
952-605-15-1 Superseded Accounting Standards Update No. 2014-09 05/28/2014
952-605-25-1 through 25-17
 Superseded Accounting Standards Update No. 2014-09 05/28/2014
952-605-35-1 Superseded Accounting Standards Update No. 2014-09 05/28/2014
952-605-40-1 Superseded Accounting Standards Update No. 2014-09 05/28/2014
952-605-45-1 Superseded Accounting Standards Update No. 2014-09 05/28/2014
952-605-50-1 through 50-3
 Superseded Accounting Standards Update No. 2014-09 05/28/2014

605-952-05Overview and Background

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605-952-15Scope and Scope Exceptions

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605-952-20Glossary

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605-952-25Recognition

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605-952-35Subsequent Measurement

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605-952-40Derecognition

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605-952-45Other Presentation Matters

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605-952-50Disclosure

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