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Group 2 - Determination of The Transaction Price

The document discusses transaction price determination and franchise fees. It defines transaction price as the amount a customer expects to pay for goods or services. Transaction price may differ from contract price due to variable consideration, financing components, or non-cash consideration. Franchise fees include initial fees paid to access the brand name and ongoing "royalty fees" based on a percentage of sales. Initial fees cover know-how transfer and startup assistance, while ongoing fees can fund marketing or renewal funds. Equipment is also commonly sold to franchisees for a separate fee.

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33 views11 pages

Group 2 - Determination of The Transaction Price

The document discusses transaction price determination and franchise fees. It defines transaction price as the amount a customer expects to pay for goods or services. Transaction price may differ from contract price due to variable consideration, financing components, or non-cash consideration. Franchise fees include initial fees paid to access the brand name and ongoing "royalty fees" based on a percentage of sales. Initial fees cover know-how transfer and startup assistance, while ongoing fees can fund marketing or renewal funds. Equipment is also commonly sold to franchisees for a separate fee.

Uploaded by

walsondev
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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ADVACC1

GROUP 2
MEMBERS:
ABDULLAH, ADHEEM
ALLIAN, LORINE MAE D.C
DELA CRUZ, HAIDEE A.
JAKILAN, MUAIJA D.
LADJAMATLI, HEESAM J.
DETERMINATION
OF THE
TRANSACTION
PRICE
The Transaction Price is “the amount of consideration to which an entity
expects to be entitled in exchange for transferring promised goods or
services to a customer.”

The transaction price may not be equal to the contract price if the
consideration in the consideration is affected by any of the
following:

c. The exitence of a
a. Variable significant financing
consideration component in the
b. Constraining
estimates of contract
variable
consideration e. Consideration
d. Non-cash payable to a
consideration customer
FRANCHISE FEES

Franchise fees - refers to the fees


that the franchisee agrees to pay to
the franchisor in a franchise
agreement. The fees may cover the
supply of know- how, initial and
subsequent services, and equipment
and other tangible assets.
1. INITIAL FRANCHISE FEES
An initial franchise fee is a one-time
payment made by an individual or business
(the franchisee) to a franchisor when they
enter into a franchise agreement. This fee
grants the franchisee the right to operate a
franchised business under the brand name,
system, and support of the franchisor.
Initial franchise fees are normally paid at
the signing of the franchise agreement and
are normally non-refundable.
Aside from consideration for the supply of
know-how, initial franchise fees may also
cover for the franchisor’s initial services.
EXAMPLE OF INITIAL SERVICES
Assistance in site selection, lease negotiations, financing fitting-out the
premises, and supervision of the construction activity.
Initial training in operating the business.
Assistance with staff recruitment and training.
Access to preferential purchasing arrangements the franchisor has put
in place.
Provision of systems (e.g., accounting, information, and quality control.
Advertisement and promotion.
Preparations for, and execution of, the grand opening.
Initial presence of a trouble-shooter for the first few days after the
opening.
CONTINUING FRANCHISE FEES

Periodic payments from franchisee to franchisor


“royalty fees”
usually based on certain percentage of the franchisee’s sales
can also be fixed amount
can be based on a sliding scale
are payable periodically
CONTINUING FRANCHISE FEES MAY BE
CHARGED SEPARATELY FOR THE FOLLOWING:
Management fees
Training and conference fees
Accounting and other special services fees
Marketing services fund
Renewal fund

NOTE:
Contributions to funds are not recognized as revenue by the
franchisor until the related performance obligation is satisfied.
3. SALE OF EQUIPMENT
AND OTHER TANGIBLE
ASSETS
in most franchise agreements, the franchisor provides
equipment and other tangible assets to the franchisee for a
separate fee. Also, the franchisor may purchase goods
centrally and supplies directly to franchisees. A markup,
purchasing fee or handling fee may be charged on tangible
assets transferred to franchisees.
ADVACC1

THANK
YOU!

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