We're Working for You: FASB

November 6, 2018

With tax season approaching (yes, 2018 is almost over – scary), IFA has a special announcement, and it's a mouthful. The Financial Accounting Standards Board (FASB) issued educational examples of revenue recognition to contribute to the financial stability of franchise companies.

Trust us, it's way more exciting than it sounds. Here's the story:

FASB is the standards-setting body for U.S. companies. Prior to IFA's involvement, there was an issue with initial franchise fees paid to franchisors from franchisees. Starting on January 1, 2019, before the educational guidance, instead of a franchisor receiving the initial franchise fees immediately as a one-time cost like it's set up to be, the prevailing interpretation said this fee must be recognized over the course of the franchisor-franchisee relationship. As you can imagine, this interpretation would harm franchise businesses and job growth across franchising because of the impact it would have on a franchisor's valuation and credit. 
Source: FRANdata

This is where IFA enters the story. Over 80 IFA member franchise brands signed a letter sent to Congress urging them to take action – and it worked. Check out the letter and the brands here. Your voice DOES make a difference, and this is proof. FASB has now issued new educational examples that will help accountants successfully implement revenue recognition for franchises. 

“If the initial franchisee fee policy that was set to begin on Jan. 1, 2019 had been in place when we first started, we wouldn't be around today to see our 100th store open!"
- Kevin Dubois, Lapels Dry Cleaning


The educational guidelines that we fought to get can be found here. Special shout out to the IFA FASB Task Force: Shelly Sun, BrightStar Care; Lee Plave, Plave Koch and Aaron Chaitovsky and Joe Turkewitz, Citrin Cooperman for helping to make this story have a happy ending.

We'd also like to thank Senator Jim Risch (R-ID), Senator Mike Crapo (R-ID), House Small Business Committee Chairman Steve Chabot (R-OH) and Ranking Member Nydia Velazquez (D-NY) for their efforts and leadership on this issue.

If you have any questions, please reach out to the IFA Government Relations & Public Policy team by emailing [email protected]. Thank you for your continued support as an IFA member.

 

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