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Heads Up — FASB proposes a practical expedient for private-company franchisors on the identification of performance obligations under ASC 606

Published on: 22 Sep 2020

This Heads Up discusses the FASB’s proposed ASU Franchisors — Revenue From Contracts With Customers (Subtopic 952-606): Practical Expedient. The proposed ASU would allow a private-company franchisor (i.e., a franchisor that is not a public business entity) to use a practical expedient when identifying performance obligations in its contracts with customers (i.e., franchisees) under ASC 606. Under the practical expedient, a private-company franchisor that enters into a franchise agreement would be able to account for certain preopening services provided to a franchisee as a single performance obligation. The practical expedient is intended to reduce the cost and complexity of applying ASC 606 to preopening services associated with initial franchise fees. Comments on the proposed ASU are due by 5 November 2020.

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