Income Wreck-ognition: FASB Update

“Mo Money Mo Problems” – Biggie Smalls, 1997

FASB Considering Changes to Income Wreck-ognition Rules to Clarify and Quantify Pre-Opening Expenses Which Can Be Recognized upon Opening.

A task force organized by IFA has worked tirelessly for relief and clarity for private franchisors around the expenses which can be recognized upon opening, from the initial franchise fee, from the Financial Accounting Standards Board (FASB). This morning, the Board voted 4-3 to advance a proposed Income Recognition expedient to its technical agenda to reduce the cost of applying ASC 606 to private franchisors. The expedient would simplify guidance on identifying performance obligations. Rather than evaluating each pre-opening service and whether it is distinct from the franchise license, the franchisor could account for the services as distinct if they are included in a pre-defined list of services. It’s anticipated that a specific practical expedient will be published for public comment in early fall. The FASB Board will then take a vote as to whether it will be formally adopted and if so, what the timing of the new expedient will be.


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