Industry Supplement | December 2017



Revenue for franchisors

KPMG’s insights on ASC 606 implementation. KPMG reports on the most significant industry issues, including updates in this December 2017 edition to clarify the latest thinking around franchisors’ accounting for advertising funds.


Applying the new revenue recognition standard

  • Company with franchise operations

Effective dates

Mandatory effective dates and early adoption provisions:

Effective date:

Public business
entities and certain
not-for-profit entities

All other entities

Annual periods – Fiscal years beginning after

    Dec. 15, 2017

 Dec. 15, 2018

Interim periods – In fiscal years beginning after

    Dec. 15, 2017

 Dec. 15, 2019

Early adoption allowed in fiscal years beginning after

    Dec. 15, 2016

 Dec. 15, 2016


Key impacts

  • Revenue guidance for franchisors in ASC 952-605 is superseded
  • Entirely new accounting model that may affect the timing of revenue recognition, in particular for up-front fees
  • Sales-based royalties will usually be recognized when franchisee sales occur
  • Performance obligations are the new unit of account. Up-front activities and ongoing goods or services to franchisees may be affected
  • Accounting for advertising fund contributions and expenses will change for most franchisors
  • New framework for assessing franchise contracts modifications and transfers

Report contents

  • Specific issues for franchisors
  • Expanded disclosures
  • Effective dates and transition
  • Impact on the organization

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