Franchisors have something to cheer about amidst the Coronavirus crisis. This morning, the Federal Accounting Standards Board (FASB) announced the delay of the ASC 606 revenue recognition rules for one year. Knowing that revenue recognition rules have been a source of confusion and uncertainty, FASB made the decision in an effort to provide relief to franchisors during this difficult time.
True to their mission of protecting, enhancing and promoting franchising, The International Franchise Association (IFA) staff spent the last several weeks engaging in important and direct conversations with FASB on the subject. “While addressing the economic impacts of COVID-19 has been our primary focus over the last month, we have continued to press forward with our other franchising priorities, particularly the 606 recognition rules as FDD filing deadlines loom ahead,” said Robert Cresanti, President of the IFA. “Today’s announcement is the result of that – it’s even more impressive that this delayed implementation is exclusive to franchises,” said Cresanti.
Following this morning’s decision, FASB will begin the process of taking public comment on an alternative accounting standard for private sector businesses. “It will allow us to make the case that certain pre-opening costs are earned immediately and should be recognized as such,” said Cresanti.
Knowing that many franchise brands have spent considerable time and resources on filings to date, Cresanti encourages all franchisors to consult with their legal and auditing firms regarding any amendments that may be made to year-end audited financial statements.