{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/606/952/#25-recognition","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"606","topic_title":"Revenue from Contracts with Customers","subtopic":"606-952","subtopic_title":"Franchisors","section":{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"606-952-25-1","para":"25-1","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_1E761B76-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Revenue shall be recognized in accordance with Topic <a altsource=\"GUID-90450890-CA59-4C9A-A88C-D53D3DE3192F.ditamap\" class=\"ditamap\">606</a>, Revenue from Contracts with Customers.</span></span> </div> </div>","snippet":"Revenue shall be recognized in accordance with Topic 606, Revenue from Contracts with Customers.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:767f8e3b031bc528a175a6d8633dc4acf80e3a37489e1394ff40f364b7ed6dea","downloaded_from":"2026-09-09T23:18:44.720Z","last_downloaded_at":"2026-09-09T23:18:44.720Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478488","source_sha256":"9bb263af126a0399bc61d51dda368a5a8f04d584549e321aa86d357e5c90d421"}},{"citation":"606-952-25-2","para":"25-2","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_1E761D0A-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">As a practical expedient, when applying the guidance in Topic <a altsource=\"GUID-90450890-CA59-4C9A-A88C-D53D3DE3192F.ditamap\" class=\"ditamap\">606</a>, a <a href=\"/glossary/f/#franchisor\" class=\"term\" title=\"The party who grants business rights (the franchise) to the party (the franchisee) who will operate the franchised business.\"><span>franchisor</span></a> that enters into a <a href=\"/glossary/f/#franchise-agreement\" class=\"term\" title=\"A written business agreement that meets the following principal criteria: The relation between the franchisor and franchisee is contractual, and an agreement, confirming the rights and responsibilities of each party, is in force for a specified period. The continuing relation has as its purpose the distribution of a product or service, or an entire business concept, within a particular market area. Both the franchisor and the franchisee contribute resources for establishing and maintaining the franchise. The franchisor's contribution may be a trademark, a company reputation, products, procedures, manpower, equipment, or a process. The franchisee usually contributes operating capital as well as the managerial and operational resources required for opening and continuing the franchised outlet. The franchise agreement outlines and describes the specific marketing practices to be followed, specifies the contribution of each party to the operation of the business, and sets forth certain operating procedures that both parties agree to comply with. The establishment of the franchised outlet creates a business entity that will, in most cases, require and support the full-time business activity of the franchisee. (There are numerous other contractual distribution arrangements in which a local businessperson becomes the authorized distributor or representative for the sale of a particular good or service, along with many others, but such a sale usually represents only a portion of the person's total business.) Both the franchisee and the franchisor have a common public identity. This identity is achieved most often through the use of common trade names or trademarks and is frequently reinforced through advertising programs designed to promote the recognition and acceptance of the common identity within the franchisee's market area. The payment of an initial franchise fee or a continuing royalty fee is not a necessary criterion for an agreement to be considered a franchise agreement.\"><span>franchise agreement</span></a> may account for the following pre-opening services as distinct from the franchise license:</span></span> <ol class=\"ol-norm\"> <li class=\"li-norm\"><span class=\"linum\">a</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_1E761E25-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Assistance in the selection of a site</span></span> </div> </li> <li class=\"li-norm\"><span class=\"linum\">b</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_1E761EF2-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Assistance in obtaining facilities and preparing the facilities for their intended use, including related financing, architectural, and engineering services, and lease negotiation</span></span> </div> </li> <li class=\"li-norm\"><span class=\"linum\">c</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_1E761FB7-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Training of the franchisee's personnel or the franchisee</span></span> </div> </li> <li class=\"li-norm\"><span class=\"linum\">d</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_1E762091-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Preparation and distribution of manuals and similar material concerning operations, administration, and record keeping</span></span> </div> </li> <li class=\"li-norm\"><span class=\"linum\">e</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_1E762160-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Bookkeeping, information technology, and advisory services, including setting up the franchisee's records and advising the franchisee about income, real estate, and other taxes or about regulations affecting the franchisee's business</span></span> </div> </li> <li class=\"li-norm\"><span class=\"linum\">f</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_1E76225C-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Inspection, testing, and other quality control programs.</span></span> </div> </li> </ol> </div> </div>","snippet":"As a practical expedient, when applying the guidance in Topic 606, a franchisor that enters into a franchise agreement may account for the following pre-opening services as distinct from the franchise license:\n(a) Assist…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a6aa81bbf964484a92e4c34ba5806664c3dc93d808dc6e5b37d375efc1842ed1","downloaded_from":"2026-09-09T23:18:44.720Z","last_downloaded_at":"2026-09-09T23:18:44.720Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478488","source_sha256":"9bb263af126a0399bc61d51dda368a5a8f04d584549e321aa86d357e5c90d421"}},{"citation":"606-952-25-3","para":"25-3","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_1E762379-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">A franchisor that elects the practical expedient in paragraph <a href=\"/asc/606/952/#606-952-25-2\" class=\"xref\">952-606-25-2</a> shall apply the guidance in paragraphs <div class=\"xref-range displayInline\"><a href=\"/asc/606/10/#606-10-25-19\" class=\"xref\">606-10-25-19 through 25-22</a></div> to determine whether the pre-opening services are distinct from one another unless it makes an accounting policy election to account for the pre-opening services as a single <a href=\"/glossary/p/#performance-obligation\" class=\"term\" title=\"A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.\"><span>performance obligation</span></a>.</span></span> </div> </div>","snippet":"A franchisor that elects the practical expedient in paragraph 952-606-25-2 shall apply the guidance in paragraphs 606-10-25-19 through 25-22 to determine whether the pre-opening services are distinct from one another unl…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7a87b5959f00a543322b52e53b3cf67b9cacf9ccd2769b46d1d40cf9765e8996","downloaded_from":"2026-09-09T23:18:44.720Z","last_downloaded_at":"2026-09-09T23:18:44.720Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478488","source_sha256":"9bb263af126a0399bc61d51dda368a5a8f04d584549e321aa86d357e5c90d421"}},{"citation":"606-952-25-4","para":"25-4","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_1E76257F-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The practical expedient in paragraph <a href=\"/asc/606/952/#606-952-25-2\" class=\"xref\">952-606-25-2</a> applies only to identifying performance obligations. An entity shall apply this guidance consistently to contracts with similar characteristics and in similar circumstances. An entity should see Topic <a altsource=\"GUID-90450890-CA59-4C9A-A88C-D53D3DE3192F.ditamap\" class=\"ditamap\">606</a> for guidance on the remaining aspects of recognizing revenue from contracts with customers, including allocating the transaction price and recognizing revenue. If an entity elects not to apply the practical expedient or if the services performed are not consistent with the list in paragraph <a href=\"/asc/606/952/#606-952-25-2\" class=\"xref\">952-606-25-2</a>, the entity shall apply the guidance in Topic <a altsource=\"GUID-90450890-CA59-4C9A-A88C-D53D3DE3192F.ditamap\" class=\"ditamap\">606</a> on identifying performance obligations.</span></span> </div> </div>","snippet":"The practical expedient in paragraph 952-606-25-2 applies only to identifying performance obligations. An entity shall apply this guidance consistently to contracts with similar characteristics and in similar circumstanc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:40c7ca18a2b0e68123f5e005d627085d81e08d053fd8e2d3ef379a049143d305","downloaded_from":"2026-09-09T23:18:44.720Z","last_downloaded_at":"2026-09-09T23:18:44.720Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478488","source_sha256":"9bb263af126a0399bc61d51dda368a5a8f04d584549e321aa86d357e5c90d421"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7fff14c324cec191f4ea1b21c1590449d458bb3ac1fa2ca934a9517dc8ff1809","downloaded_from":"2026-09-09T23:18:44.720Z","last_downloaded_at":"2026-09-09T23:18:44.720Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478488","source_sha256":"9bb263af126a0399bc61d51dda368a5a8f04d584549e321aa86d357e5c90d421"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4f122a799c6e010ba80587485387957ee6ebcfd165f8b935ef9cb6cca5bc79bc","downloaded_from":"2026-09-09T23:18:44.720Z","last_downloaded_at":"2026-09-09T23:18:44.720Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478488","source_sha256":"9bb263af126a0399bc61d51dda368a5a8f04d584549e321aa86d357e5c90d421"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4f122a799c6e010ba80587485387957ee6ebcfd165f8b935ef9cb6cca5bc79bc","downloaded_from":"2026-09-09T23:18:44.720Z","last_downloaded_at":"2026-09-09T23:18:44.720Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478488","source_sha256":"9bb263af126a0399bc61d51dda368a5a8f04d584549e321aa86d357e5c90d421"}}