My client purchased an existing Franchise business (insurance) from another franchisee. The purchase cost was a lumpsum of $200,000. This included all FFE and the book of business (Goodwill). Also, the previous owner (the seller) paid for the franchise cost of $40,000 initially when he had started the business 5 years ago. Question: In preparing the balance sheet of my client (the buyer)- Out of the $200k asset, can I assign $40,000 of franchise fees as an intangible asset? Note that - My client (the buyer) did not pay any franchise fees to the seller or to the Franchisor.
