Revenue – ifrs 15 handbook

Franchise licences generally provide a right to access IP
IFRS 15.IE289–IE296
Franchise rights generally provide a right to access the underlying IP. This is 
because the franchise right is typically affected to some degree by the licensor’s 
activities of maintaining and building its brand. For example, the licensor 
generally undertakes activities to analyse changing customer preferences and 
enact product improvements and the customer has the right to exploit and 
benefit from those product improvements. 
Example 57 in the standard illustrates a 10-year franchise arrangement in which 
the entity concludes that the licence provides access to its IP throughout the 
licence period.
Only consider licensor’s activities that do not transfer a good or 
service to the customer
IFRS 15.B58, BC410
When evaluating the nature of its promise to provide a licence of IP, a licensor 
considers only activities that do not transfer a good or service to the customer.
The third criterion for a licence to be a right to access the entity’s IP is that the 
licensor’s activities do not transfer a good or service to the customer. If all of 
the activities that may significantly affect the IP transfer goods or services to 
the customer, then this criterion will not generally be met, resulting in point-in-
time recognition.
For example, a contract that includes a software licence and a promise to 
provide updates to the customer’s software does not result in a conclusion 
that the licensor is undertaking activities that significantly affect the IP to which 
the customer has rights. This is because the provision of updates constitutes 
the transfer of an additional good or service to the customer – i.e. updates are 
distinct from the licence.

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9 Licensing | 217
9.3 Determining the nature of a distinct licence
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