Revenue – ifrs 15 handbook

9.3 
Determining the nature of a distinct licence
IFRS 15.B56
A licence for IP that is distinct from other goods or services in the contract is a 
separate performance obligation. To determine whether the performance obligation 
is satisfied at a point in time or over time, the entity considers whether the nature of 
its promise is to provide the customer with a right to:
– access the entity’s IP throughout the licence period; or
– use the entity’s IP as it exists at the point in time at which the licence is granted.
The revenue from a right-to-access licence is recognised over time and the revenue 
from a right-to-use licence is recognised at a point in time.
IFRS 15.B58
The nature of an entity’s promise in granting a licence is a promise to provide a right 
to access the entity’s IP if all of the following criteria are met.
Yes
Right to access
the entity’s IP
Right to
use the
entity’s
IP
No
Entity expects
to undertake
activities that
significantly
affect the IP
Criterion 1
Criterion 2
Criterion 3
Activities do not
result in the
transfer of a
good or service
to the customer
Rights directly
expose the
customer to
positive or
negative effects
of the entity’s
activities
Are all of the following criteria met?
IFRS 15.B59
To determine whether a customer could reasonably expect the entity to undertake 
activities that do not result in the transfer of a good or service to the customer that 
significantly affect the IP, the entity considers its customary business practices, 
published policies and specific statements, and whether there is a shared economic 
interest between the entity and the customer.

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9 Licensing | 215
9.3 Determining the nature of a distinct licence
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IFRS 15.B59A
Under Criterion 1, an entity ‘significantly affects’ the IP when either the:
– activities are expected to change the form (e.g. the design or content) or 
functionality (e.g. the ability to perform a function or task) of the IP; or
– ability to obtain benefit from the IP is substantially derived from, or dependent 
on, those activities (e.g. the ability to benefit from a brand is often dependent on 
the entity’s ongoing activities to support or maintain the value of that brand).
An entity’s ongoing activities do not significantly affect the IP when the IP has 
significant stand-alone functionality, unless they change that functionality. IP 
that often has significant stand-alone functionality includes software, biological 
compounds or drug formulas, and completed media content (e.g. films, television 
shows and music recordings).
IFRS 15.B61
If the criteria are not met, then the nature of the licence is a right to use the entity’s 
IP as that IP exists at the date the licence is granted. This is because in this case the 
customer can direct the use of, and obtain substantially all of the remaining benefits 
from, the licence at the point in time when it transfers. When the nature of the 
licence is a right to use the entity’s IP, it is accounted for as a performance obligation 
satisfied at a point in time.
IFRS 15.B62
Contractual provisions relating to time, geographic region or use could represent:
– additional licences if they create a right to use or access IP that the customer 
does not already control; or 
– only attributes of a promised licence to IP that the customer controls. 
If these provisions do not represent multiple licences, then they are not considered 
when determining the nature of the entity’s promise in granting a licence (i.e. 
whether a right-to-use or right-to-access licence).
A guarantee provided by the licensor that it has a valid patent to the underlying 
IP and that it will maintain and defend that patent is also not considered when 
determining whether the licence provides a right to access or a right to use the 
entity’s IP.