Revenue – ifrs 15 handbook

Example 4 – Customer’s option to purchase additional licences
Software Vendor S enters into a five-year software arrangement with 
Customer C. As part of the arrangement, S provides access to download copies 
of the software from its website. C pays a fixed fee of 300,000 for up to 200 
software downloads. Each downloaded copy can have only a single user. C pays 
an additional 1,000 per copy downloaded in addition to the 200, pro-rated based 
on the remaining licence period at the time of download (e.g. 1,000 for copies 
downloaded in Year 1; 800 for copies downloaded in Year 2). 
C receives access codes for 200 downloads on commencement of the contract. 
C has to request access codes for each additional download, which S will 
provide. S measures the number of downloads and C pays for any additional 
downloads each quarter.
The initial arrangement is generally a multiple licence scenario (i.e. C has 
been granted 200 software licences) that can be accounted for as a single 
performance obligation because the licences are transferred to C at the same 
point in time. Therefore, the option for additional downloads represents an 
option to acquire additional user licences to the software for 1,000 per licence.
Because the 1,000 per copy option price is less than the initial per-user licence 
fee of 1,500 per licence (300,000 / 200 users), S needs to evaluate whether the 
option provides C with a material right (see 
Section 10.4
).

---

© 2019 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
9 Licensing | 211
9.2 Determining whether a licence is distinct
| 
Assessing whether a licence is distinct may require significant 
judgement
Licences of IP are frequently included in arrangements that include promises for 
other goods or services. The evaluation of whether a licence is distinct is often 
complex and requires assessment of the specific facts and circumstances of 
the contract. The standard provides the following illustrative examples that may 
be helpful in evaluating different fact patterns.