Franchise arrangement and performance obligation The franchise involves a license to use the franchisor property, and sales of the goods and service in the name of franchisor. In the franchise transaction, the franchisor has multiple performance obligations, and the franchisor gives the selling rights to the franchisee in particular period. The franchisor should provide the start-up services to the franchisee. The revenue recognition principle The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed. To discuss: The timing of revenue recognition in franchise sales.

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Chapter 5, Problem 5.41BE

To determine

Franchise arrangement and performance obligation

The franchise involves a license to use the franchisor property, and sales of the goods and service in the name of franchisor. In the franchise transaction, the franchisor has multiple performance obligations, and the franchisor gives the selling rights to the franchisee in particular period. The franchisor should provide the start-up services to the franchisee.

The revenue recognition principle

The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed.

To discuss: The timing of revenue recognition in franchise sales.

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