Revenue – ifrs 15 handbook

Example 2 – Promise is a licence
Production Company P produces music content. P enters into a three-year 
licence agreement to provide an initial music library and rights to future content 
to Customer C. The terms of the licence allow C to play, stream and broadcast 
the content to other parties. 
P evaluates whether it is providing C with a service or a licence to its content. P 
concludes that the contract includes a licence of IP because C takes delivery of 
the music library that it can use without further services from P. 
As a result, the licensing guidance applies and P needs to evaluate whether 
the licence related to the initial music library is distinct from the rights to 
future content.

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208 | Revenue – IFRS 15 handbook
Different accounting for a licence and sale of IP
A licence establishes a customer’s rights to a licensor’s IP and the licensor’s 
obligations to provide those rights. Specific application guidance is provided for 
measuring and recognising revenue from licensing transactions, including guidance 
for recognising revenue from sales- or usage-based royalties (see 
Section 9.6
).
The accounting depends on the legal distinction between a sale and a licence 
of IP. If a transaction is a legal sale of IP, then it is subject to the general model 
in the same way as the sale of any good or other non-financial asset. Sales- or 
usage-based royalties on a sale of IP are subject to the guidance on measuring 
variable consideration, including the constraint, and not the specific recognition 
guidance applicable to sales- or usage-based royalties from a licence of IP.
No definition of intellectual property
The term ‘intellectual property’ is not defined in the standard, nor elsewhere in 
IFRS. In some cases, it will be clear that an arrangement includes a licence of 
IP – e.g. a trademark. In other cases – e.g. when content is being made available 
to a customer over the internet – it may be less clear and the accounting may 
be different depending on that determination. Therefore, an entity may need 
to apply judgement to determine whether the guidance on licences applies to 
an arrangement.