Franchisors

ASC 952 supplies the incremental, industry-specific GAAP for franchisors — entities that grant franchise rights to franchisees — and must be applied on top of, not instead of, all other applicable GAAP (952-10-15-1 through 15-3). Because ASU 2014-09 moved franchise fee revenue recognition to ASC 606 and contract cost capitalization to ASC 340-40, what remains in Topic 952 is guidance on franchising costs (costs of continuing franchise fees and regular, recurring indirect general, selling and administrative costs are expensed as incurred — 952-10-25-1; 952-10-25-2), presentation (when practicable, segregate costs of franchisor-owned outlets from those of franchised outlets — 952-10-45-1), and disclosure (outlet activity when changes are significant, plus significant commitments and obligations under agreements not yet substantially performed — 952-10-50-1; 952-10-50-2). The key idea: franchisors recognize revenue and capitalize incremental contract acquisition costs under the general revenue model, while Topic 952 governs cost expensing, franchised-versus-company-owned cost presentation, and franchise-specific disclosures.

Subtopics

1. 10Overall15 ¶

   ASC 952-10 provides incremental, industry-specific accounting and reporting guidance for franchisors — the parties that grant business rights (the franchise) to franchisees. After ASU 2014-09 removed the old franchise revenue recognition rules (now handled under ASC 606 and 340-40), what remains is chiefly guidance on franchising costs, presentation of franchisor-owned versus franchised outlet costs, and outlet/commitment disclosures. Franchisors must also apply all other applicable GAAP not contained in this Topic.

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