According to FASB, initial franchise fees should be recognized as income when:
A)the franchiser has substantially performed or satisfied all material services and conditions.
B)the franchiser has collected the majority of fee in cash.
C)the franchisee shows the ability to pay the fee.
D)the franchiser bills the franchisee.

Question

Quizplus · Accepted Answer

According to FASB, initial franchise fees should be recognized as income when the franchiser has substantially performed or satisfied all material services and conditions. This means that the franchiser has fulfilled their obligations and the franchisee has met all the necessary requirements, indicating that the initial fee can be recognized as income. Collecting the fee in cash or billing the franchisee does not necessarily indicate that all conditions have been met. The ability to pay the fee is also not a determining factor in recognizing it as income.

According to FASB, Initial Franchise Fees Should Be Recognized as Income