Hi I am reposting this as I didnt get a response the first time - any help with this would be appreciated.
I know the convention is to amortise franchise fees is to apportion over the life over the franchise agreement. I have a client who has signed up to a 5 year franchise agreement so my intention was to amortise over 5 years. However, he is saying that he will renew at 5 years and operate the franchise for at least 10 years (Given the amount he paid he would need this amount of time for the business case to be viable). My question is therefore, can I amortise the original fee over 10 years rather than 5 given the intent is to trade for 10 years or am I restricted to 5 years? The reason it hs come up is that the amortisation charge is restricting profit and therefore his ability to draw divs, if it was amortised over 10 yrs then there would be more headroom for potential divs. Any views appreciated.