Revenue – ifrs 15 handbook

Recognition timing
Rationale
Examples
Point in time
Revenue is recognised 
at a point in time 
because there is no 
explicit or implicit 
obligation for the entity 
to undertake activities 
during the licence 
period to (a) change the 
form or functionality 
of the IP or (b) support 
or maintain the value 
of the IP during the 
licence period.
– Software
– Biological 
compounds
– Drug formulas
– Copies of media 
content: e.g. films, 
television shows, 
music

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218 | Revenue – IFRS 15 handbook
Recognition timing
Rationale
Examples
Over time
Revenue is recognised 
over time because 
the IP’s design or 
functionality changes 
over time or because 
the customer’s ability 
to obtain benefits from 
the IP is substantially 
derived from, or 
dependent on, the 
company’s ongoing 
activities that will be 
performed over the 
licence period.
– Brand names
– Franchise rights
– Logos and team 
names
Cost and effort to undertake activities are not the focus of the 
analysis
IFRS 15.IE297–IE302, BC409
A licence is not satisfied over time solely because the entity is expected to 
undertake activities that significantly affect the licensed IP (the first criterion). 
Those activities also have to directly expose the customer to their effects (the 
second criterion). When the activities do not affect the customer, the entity is 
merely changing its own asset – and although this may affect the entity’s ability 
to grant future licences, it does not affect the determination of what the current 
licence provides to the customer or what the customer controls.
Example 58 in the standard illustrates that, when determining the nature of its 
promise, an entity focuses on whether its activities directly affect the IP already 
licensed to the customer – e.g. updated character images in a licensed comic 
strip – rather than the significance of the cost and effort of the entity’s ongoing 
activities. An entity also focuses on whether the customer’s ability to obtain 
benefit from the IP is substantially derived from, or dependent on, the entity’s 
activities (i.e. the publishing of the comic strip).
Similarly, a media company licensing completed seasons of television 
programmes and simultaneously working on subsequent seasons would 
generally conclude that the subsequent seasons do not significantly affect 
the IP associated with the licensed seasons, and would not focus merely on 
the significance of the cost or efforts involved in developing the subsequent 
seasons.

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© 2019 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
9 Licensing | 219
9.3 Determining the nature of a distinct licence
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