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FASB issues new optional guidance for accounting for private company franchisor pre-opening activities

On January 28, the FASB issued ASU 2021-02, which is intended to simplify the accounting for certain pre-opening activities in a franchise agreement. Under ASU 2021-02, a private company franchisor can elect to account for certain pre-opening services as distinct from the franchise license without performing the assessment otherwise required by the revenue standard. The optional expedient only applies to identifying performance obligations in the revenue recognition model and does not amend other aspects of the revenue standard.

The effective date and transition provisions vary based on if a private company franchisor has adopted ASC 606. Stay tuned for updates to our Revenue from contracts with customers guide to reflect the new guidance.

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