CERTYNEX IFRS ACADEMY

Boulangeries Ferrand acquire a franchise for 5 years. The contract provides for a possible renewal for 5 years, at the sole discretion of the franchisor, who last year refused to renew several franchisees in the region. Ferrand would like to operate the outlet for 10 years. What useful life should be used for the franchise?

10 years, in line with the entity's wish and the contractual possibility of renewal.

5 years, as there is no evidence that renewal will be obtained.

An indefinite life, since the contract provides for a possibility of renewal.

None: the franchise is not amortised until the franchisor has decided on renewal.