Joel Schmitz CPA

What Do They Mean By Franchise rights?
An exclusive right to produce and/or sell a certain product or service within a designated geographic area. Franchise rights are typically purchased and accounted for as intangible assets on the books of the franchisee (the buyer of the franchise) at the price paid for the rights. This capitalized cost is amortized to expense over the legal term of the franchise rights on a straight-line basis. The amount of accumulated amortization is maintained in a contra-asset account appearing on the balance sheet as an offset against the franchise right’s original capitalized cost. The resulting net balance sheet amount is referred to as the franchise’s “book value.”
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