Franchise Accounting IFRS 15

Revenue Recognition from Franchise

PROBLEM SOLVING 7 Gorefoods enters into a franchise agreement with Puregoods Inc. on October 1, 2020 at an initial franchise fee of P 1,500,000. Down payment was P 200,000, while the balance will be paid in 10 equal payments annually. 1% of the sales will also be paid as continuing fee. As the franchisor's accountant you should: Consider the following standalone price for allocating the transaction price -rights to trade name -services, training, delivery. P 500,000 800,000 -equipment 500,000 Agreements: The franchise right is not distinct and will expire after 5 year. Equipment is not exclusive and can be replace with any equipment available in the market. Trainings and other services are separate or can be outsourced. Substantial performance is achieved when Puregoods acquire control over the rights, and transferred the equipment. While the training will be continuous until the franchise expires. Sales at the year-end amounted to 800,000. Identify the performance obligation Prepare the journal entries on this franchise arrangement