On November 4, Grant Thornton submitted a comment letter in response to the FASB’s proposed ASU, Franchisors – Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient, which is designed to reduce the cost and complexity of identifying performance obligations under Step 2 of the revenue guidance in ASC 606 for nonpublic franchisors. The proposal would allow nonpublic franchisors to identify pre-opening services as a single performance obligation.
Grant Thornton answered several questions the FASB asked of respondents and included an appendix for other considerations highlighting their concerns that the amendments
- Set a precedent for other industries to request similar relief, which would be contrary to ASC 606’s overall objective of establishing uniform guidance across industries
- Introduce additional complexities negating the stated objective of reducing cost and complexity in accounting for initial franchise fees
To read our comments in full, download the letter here.
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