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Acctg 6N Franchise Operations

This document contains a true/false quiz and multiple choice questions about accounting for franchise operations from the franchisor's perspective under PFRS 15. It addresses topics like how to recognize initial franchise fees and ongoing royalty revenue over time if the license provides the customer a right to access the franchisor's intellectual property as it exists throughout the license period. The document provides the student's name, class, date, and ID number for the assignment.

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ALIX V. LIM
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350 views2 pages

Acctg 6N Franchise Operations

This document contains a true/false quiz and multiple choice questions about accounting for franchise operations from the franchisor's perspective under PFRS 15. It addresses topics like how to recognize initial franchise fees and ongoing royalty revenue over time if the license provides the customer a right to access the franchisor's intellectual property as it exists throughout the license period. The document provides the student's name, class, date, and ID number for the assignment.

Uploaded by

ALIX V. LIM
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Name: Lim, Alix Class: 7:30-8:30 C139- T1 Date: 03/10/22 ID: 17-1333-598

Accounting for Franchise Operations- Franchisor


True/False
Indicate whether the statement is true or false.

FALSE 1. The current PFRSs do not address the accounting for revenues from franchise contracts.

TRUE 2. If the nature of an entity’s promise to transfer a license is to provide the customer the right to
access the entity’s intellectual property as it exists throughout the license period, revenue from the
franchise contract shall be recognized over the term of the franchise.

FALSE 3. Under PFRS 15, revenue is measured at fair value of the consideration received or receivable in
the contract.

TRUE 4. If the nature of an entity’s promise to transfer a license is to provide the customer the right to
use the entity’s intellectual property as it exists at the point in time at which the license is granted,
revenue from the franchise contract shall be recognized at the point in time when the license is
transferred to the customer.

FALSE 5. Under the current PFRSs, intial franchise fees are recognized in full as revenue when there is
substantial performance by the franchisor indicated by the commencement of operations of the new
franchise business.

FALSE 6. If the intellectual property to which the customer has rights will change over the license period
because the entity continues to be involved with its intellectual property, the nature of the entity’s
promise to transfer the license is most likely a “right to use.”

FALSE 7. If, at the contract inception, the entity determines that the collectabiltity of the consideration
in a franchise agreement is significantly uncertain, the entity may recognize revenue from the contract
using either the installment sales method or the cost recovery method.

FALSE 8. If the intellectual property to which the customer has rights will not change over the license
period, the nature of the entity’s promise to transfer the license is most likely a “right to access.”

FALSE 9. The third step in the recognition of revenue under PFRS 15 is to identify the contract with the
customer.

FALSE 10. If the promise to transfer the license is not distinct, the entity treats all the promises in the
contract as a single obligation. The entity shall apply the specific principles in PFRS 15 to determine
whether the license provides the customer a “right to access” or a “right to use” the entity’s intellectual
property.
Name: Lim, Alix ID: 17-1333-598

Multiple Choice
Identify the choice that best completes the statement or answers the question.

11) b. Recognize the P1,500,000 intial franchise fee as revenue in full on March 31, 2020.
12) b. Franchisor Co. shall recognize revenue d. equal to 3% of Franchisee’s sales as and when those
sales occur.
13) a. ₱400,000
14) a. ₱400,000
15) d. ₱6,667.67
400,000 / 5 = 80,000 x 1/12 = 6,667.67

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