An entity grants a franchisee the right to operate a restaurant in a specific market using the entity's brand name, concept and menu for a period of ten years. The entity has granted others similar rights to operate this restaurant concept in other markets. The entity commonly conducts national advertising campaigns, promoting the brand name and restaurant concept generally. The franchisee will also purchase kitchen equipment from the entity. The entity wil receive P950,000 upfront (P50,000 for the kitchen equipment and P900,000 for the franchise right). Under PFRS 15, how shall the entity recognize the P950,000 transaction price as revenue from contract with customers? The P50,000 upfront fees shall be recognized as revenue at a specific point of time which is the date of delivery of the kitchen equipment while the remaining P900,000 upfront fee shall be recognized over a period of time of 10 years, the term of the
An entity grants a franchisee the right to operate a restaurant in a specific market using the entity's brand name, concept and menu for a period of ten years. The entity has granted others similar rights to operate this restaurant concept in other markets. The entity commonly conducts national advertising campaigns, promoting the brand name and restaurant concept generally. The franchisee will also purchase kitchen equipment from the entity. The entity wil receive P950,000 upfront (P50,000 for the kitchen equipment and P900,000 for the franchise right). Under PFRS 15, how shall the entity recognize the P950,000 transaction price as revenue from contract with customers? The P50,000 upfront fees shall be recognized as revenue at a specific point of time which is the date of delivery of the kitchen equipment while the remaining P900,000 upfront fee shall be recognized over a period of time of 10 years, the term of the
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:An entity grants a franchisee the right to operate a restaurant in a specific market using the entity's brand name,
concept and menu for a period of ten years. The entity has granted others similar rights to operate this restaurant
concept in other markets. The entity commonly conducts national advertising campaigns, promoting the brand name,
and restaurant concept generally. The franchisee will also purchase kitchen equipment from the entity. The entity will
receive P950,000 upfront (P50,000 for the kitchen equipment and P900,000 for the franchise right).
Under PFRS 15, how shall the entity recognize the P950,000 transaction price as revenue from contract with
customers?
The P50,000 upfront shall be recognized as revenue at a specific point of time which is the date of delivery of the kitchen
equipment while the remaining P900,000 upfront fee shall be recognized over a period of time of 10 years, the term of the
contract.
The whole P950,000 upfront fee shall be recognized as revenue at a specific point of time which is the date of expiration of the 10-
year term of the contract.
The whole P950,000 upfront fee shall be recognized as revenue at a specific point of time which is the date of delivery of the
kitchen equipment.
O The whole P950,000 upfront fee shall be recognized as revenue over a period of time of 10 years, the term of the contract.
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