ASC

ASC 952-10

Overall

952 Franchisors

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In brief

IntermediateIndustry-specificDisclosurePresentationRevenue

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.

Key points (7)
  • The Topic applies to all entities meeting the definition of franchisor and covers costs associated with franchising activities and transactions between franchisor and franchisee (952-10-15-2; 952-10-15-3).
  • Entities in scope must also comply with applicable guidance outside this Topic; the franchisor guidance is only incremental (952-10-15-1).
  • Costs relating to continuing franchise fees shall be expensed as incurred (952-10-25-1).
  • Indirect costs of a regular and recurring nature incurred irrespective of sales level (general, selling, and administrative) shall be expensed as incurred; incremental costs of obtaining a contract with a customer follow Subtopic 340-40 (952-10-25-2).
  • When practicable, costs related to franchisor-owned outlets shall be distinguished from costs related to franchised outlets, such as by segregating franchised-outlet costs (952-10-45-1).
  • If there are significant changes in outlets during the period, disclose the number of franchises sold, franchises purchased, franchised outlets in operation, and franchisor-owned outlets in operation (952-10-50-1).
  • Disclose the nature of all significant commitments and obligations from franchise agreements, including services the franchisor has agreed to provide under agreements not yet substantially performed (952-10-50-2).

For students. The classic trap is citing ASC 952 for franchise fee revenue recognition — ASU 2014-09 superseded that guidance, so initial and continuing franchise fee revenue is now recognized under ASC 606 and related contract costs under ASC 340-40, leaving 952-10 to govern cost expensing, outlet cost segregation, and disclosures.

franchisorfranchiseecontinuing franchise feesfranchising costsfranchisor-owned outletsfranchised outletscosts of obtaining a contractfranchise agreement commitments

Machine-generated study aid for ASC 952-10. Check the source paragraphs below.

952-10-00Status

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952-10-00-1
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
Contract Added Maintenance Update 2017-09 (PDF) 05/30/2017
Customer Added Maintenance Update 2017-09 (PDF) 05/30/2017
Franchise Agreement Superseded Accounting Standards Update No. 2014-09 05/28/2014
952-10-05-1 Amended Maintenance Update 2017-09 (PDF) 05/30/2017
952-10-05-1 Amended Accounting Standards Update No. 2014-09 05/28/2014
952-10-05-2 Amended Accounting Standards Update No. 2014-09 05/28/2014
952-10-10-1 Amended Maintenance Update 2017-09 (PDF) 05/30/2017
952-10-15-3 Amended Accounting Standards Update No. 2014-09 05/28/2014
952-10-25-1 Added Maintenance Update 2017-09 (PDF) 05/30/2017
952-10-25-2 Added Maintenance Update 2017-09 (PDF) 05/30/2017
952-10-45-1 Added Maintenance Update 2017-09 (PDF) 05/30/2017
952-10-50-1 Added Accounting Standards Update No. 2014-09 05/28/2014
952-10-50-2 Added Maintenance Update 2017-09 (PDF) 05/30/2017
952-10-60-3 Added Accounting Standards Update No. 2009-17 12/23/2009

952-10-05Overview and Background

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952-10-05-1
The Franchisors Topic provides incremental accounting and reporting standards for franchisors.

952-10-10Objectives

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952-10-10-1
The objective of this Topic is to provide incremental accounting and reporting standards for franchisors.

952-10-15Scope and Scope Exceptions

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Overall Guidance

952-10-15-1
The Subtopics within the Franchisors Topic only provide incremental industry-specific guidance for the entities defined in this Scope Section, or as further defined in the Scope Sections of the individual Franchisors Subtopics. Entities within the scope of this Topic shall also comply with the applicable guidance not included in this Topic.

Entities

952-10-15-2
The guidance in this Subtopic applies to all entities that meet the definition of franchisor, that is, the party that grants business rights (the franchise) to the party (the franchisee) that will operate the franchised business.

Transactions

952-10-15-3
The guidance in this Topic applies to the following:
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2014-09.
  2. b
    Costs associated with franchising activities
  3. c
    Transactions between the franchisor and franchisee.

952-10-25Recognition

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Costs

952-10-25-1
Costs relating to continuing franchise fees shall be expensed as incurred.
952-10-25-2
Indirect costs of a regular and recurring nature that are incurred irrespective of the level of sales, such as general, selling, and administrative costs, shall be expensed as incurred. For guidance on accounting for the incremental costs of obtaining a contract with a customer, see Subtopic 340-40.

952-10-45Other Presentation Matters

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952-10-45-1
Costs related to franchisor-owned outlets shall be distinguished from costs related to franchised outlets when practicable. That may be done by segregating costs related to franchised outlets.

952-10-50Disclosure

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952-10-50-1
If there are significant changes in franchisor-owned outlets or franchised outlets during the period, the number of the following shall be disclosed:
  1. a
    Franchises sold
  2. b
    Franchises purchased during the period
  3. c
    Franchised outlets in operation
  4. d
    Franchisor-owned outlets in operation.
952-10-50-2
The nature of all significant commitments and obligations resulting from franchise agreements, including a description of the services that the franchisor has agreed to provide for agreements that have not yet been substantially performed, shall be disclosed.

952-10-60Relationships

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Presentation of Financial Statements

952-10-60-1
For illustrations of franchisor reporting of discontinued operations, see paragraphs
205-20-55-83 through 55-103
.

Entertainment—Cable Television

952-10-60-2
For guidance on accounting for franchise costs related to cable television entities, see paragraphs 922-350-25-3; 922-350-35-4; and 922-720-25-4.

Consolidation

952-10-60-3
For guidance on consolidation requirements applicable to a franchisor related to an entity that is the franchisee, see Subtopic 810-10.

Related subtopics