What is Licenses of intellectual property?
In short
A license of functional intellectual property, such as software, a film or a drug formula, gives a right to use it and is recognized at a point in time. A license of symbolic intellectual property, such as a brand or logo, gives a right to access it and is recognized over time.
Key takeaways
- Sales-based or usage-based royalties are recognized when the later sale or use occurs, not estimated upfront.
- Revenue from a right-to-use license can't be recognized before the license period begins.
- Franchise rights are usually symbolic intellectual property.
Where it's tested
FAR: Revenue Recognition — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A software company grants a customer a perpetual license to functional intellectual property, delivered immediately, plus one year of ongoing technical support. How is revenue recognized?