Revenue – ifrs 15 handbook

Substantial break between periods during which a customer is 
able to use (or access) IP
In some cases, a substantial break between periods during which a customer 
is able to use (or access) IP might suggest that those two separate periods 
of time represent separate licences, even if the rights conveyed during each 
period are the same. This scenario arises principally in the media industry and is 
often referred to as a ‘broken windows’ scenario. The facts and circumstances 
will need to be considered when deciding whether broken windows should be 
accounted for as a single licence or multiple licences.
9.6 
Sales- or usage-based royalties
IFRS 15.B63
For sales- or usage-based royalties that are attributable to a licence of IP, the amount 
is recognised at the later of: 
– when the subsequent sale or usage occurs; and
– the satisfaction or partial satisfaction of the performance obligation to which 
some or all of the sales- or usage-based royalty has been allocated. 
IFRS 15.B63A–B63B
This is an exception to the general requirements and it applies when the:
– royalty relates only to a licence of IP; or
– licence is the predominant item to which the royalty relates (e.g. when the 
customer would ascribe significantly more value to the licence than to the other 
goods or services to which the royalty relates).
An entity does not split a royalty into a portion that is subject to the exception and 
a portion that is subject to the guidance on variable consideration, including the 
constraint (see 
Section 3.1
).
If the exception does not apply, then the entity applies the general guidance on 
variable consideration, including the constraint, to the royalty arrangement and 
includes its estimate in the transaction price.

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226 | Revenue – IFRS 15 handbook