Revenue – ifrs 15 handbook

Example 15B – Software licence with a guaranteed minimum (2)
Modifying Example 15A, the software licence provides C with a right to access 
M’s IP and revenue is recognised over time. 
M determines that the guaranteed minimum is substantive and that it is 
appropriate to recognise the guaranteed minimum amount on a straight-line 
basis over the licence period. M recognises any royalty amounts above the 
guaranteed minimum only after the guaranteed minimum of 5,000 has been 
exceeded. However, other methods may also be appropriate, as long as a single 
measure of progress is used for the performance obligation.
Conversely, if the guaranteed minimum is considered non-substantive then M 
recognises revenue as and when sales occur.
Example 16 – Allocation of guaranteed minimum among multiple 
performance obligations
Tech Company T enters into a three-year arrangement to license its technology 
to Customer C along with a promise to provide when-and-if-available upgrades 
developed during the licence term.
T concludes that the licence and promise to provide when-and-if-available 
upgrades are two distinct performance obligations.
– The licence provides C with a right to use the technology, which is a 
performance obligation satisfied at a point in time.
– The right to when-and-if-available upgrades is a performance obligation 
satisfied over time because C simultaneously receives and consumes the 
benefits of having access to when-and-if-available upgrades continuously 
throughout the contract term.
T receives a royalty of 10% of C’s sales subject to a minimum guaranteed 
amount of 10,000. T estimates that the total consideration (fixed plus variable) 
will be 50,000. 
T estimates the stand-alone selling price of the licence and when-and-if-
available upgrades to be 15,000 and 35,000, respectively. T concludes that 
the royalty is predominantly associated with a licence of IP because both 
performance obligations are related to providing IP. 

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9 Licensing | 231
9.6 Sales- or usage-based royalties
| 
C’s gross sales and the related royalties earned each year are as follows. This 
information is not known at the beginning of the contract.