Franchise question

1. The franchisor should apply the requirements of what accounting standard in

accounting its income from franchise contracts?

a. PAS 11
b. PAS 18
c. PFRS 15
d. SIC 31

2. I. For performance obligations satisfied over time, revenue is recognized as the

entity progresses towards the complete satisfaction of the performance obligation.
II. For performance obligations satisfied at a point in time, revenue is recognized
when the entity completely satisfied the performance obligation.
III. If the license provided to the customer is a right to access, the performance
obligation is satisfied at a point in time. If the customer is provided with a right to use,
the performance obligation is satisfied over time.
IV. The transaction price is allocated to the performance obligations on the RELATIVE
STAND-ALONE PRICES of the distinct goods and services

a. All statements are true

b Two statements are false
c. Three statements are true
d. Three statements are false

3. I. Auditor should be in contact with the franchisee to discuss any question or concern
regarding the scope of the audit, when the audit will take place, and the records that will need
to be available.
II. The most successful method to conduct an audit is to obtain necessary records in
the least amount of time and with as little disruption to the franchisor as possible and
then to quickly and accurately apply the procedures to validate compliance or accurately
substantiate levels of noncompliance.

a. Both statements are true

b. Only statement one is true
c. Both statements are false
d. Only statement two is true

4. I. After the audit program has been designed, the candidate selected and the notices
sent, a franchise should be given limited amount of time to gather the records for the
audit.
II. A franchise system should be prepared for destroyed records, difficulty in scheduling,
challenges to the right to audit, challenges to the record being sought to review and a
host of other concerns.

a. Both statements are false

b. Only statement two is true
c. Both statements are true
d. Only statement one is true

5-7 Differentiate initial franchise fee and continuing fee. (3pts)

8. ______________It is a type of license that grants a franchisee access to a franchisor's

proprietary business knowledge, processes, and trademarks, thus allowing the franchisee to sell
a product or service under the franchisor's business name.
Ans. Franchise

9. ______________It is a type of franchise where the franchisor permits the franchisee to

manufacture their products and sell them under its trademarks .
Ans. Manufacturing

10. ____________ It is a form of marketing and distribution, in which the franchisor grants the
franchisee the right to run a business, selling a product or providing a service using the
franchisor's business system.
Ans. Franchising