Lesson 6 P2: Franchise Accounting - Notes

Franchisor Point of View

*Unearned Interest Income if note is non-interest bearing.

1. Reasonably Assured Collection = recognize Notes Receivable
     a. Accrual Method
            Unearned Franchise Revenue                   XX
                  Franchise Revenue                                      XX

2. Doubtful Collection = Notes Receivable NOT recognized
     a. Installment Method
     b. Cost Recovery Method = Non-IFRS

A. Initial Franchise Fee = recognized when
     a. Services are substantially performed (or when business commences)
     b. Non-refundable initial payments

*Can partially recognize initial franchise fee for the partial services rendered as long as initial payments are non-refundable.

B. Continuing Franchise Fee = recognize revenue when earned, expense when incurred