Case #1: The license provides Customer X the right to use Entity A’s patented processes. Customer X continues to operate using its trade name and has the discretion of developing a new product name for the products it will produce using the patented processes. The license does not explicitly require Entity A to undertake activities that will significantly affect the intellectual property to which Customer A has rights. Neither does Customer X expect that Entity A will undertake such activities. Entity A grants the license to Customer X on December 31, 20x1. How much revenue from the franchise contract will Entity A recognize in 20x1?
On December 31, 20x1, Entity A enters into a contract with Customer X to transfer a license for a fixed fee of
₱100,000 payable as follows:
-20% is payable upon signing of contract.
-80% is represented by a note receivable collectible in 4 equal annual installments starting December 31, 20x2. The appropriate discount rate is 12%.
Case #1:
The license provides Customer X the right to use Entity A’s patented processes. Customer X continues to operate
using its trade name and has the discretion of developing a new product name for the products it will produce
using the patented processes. The license does not explicitly require Entity A to undertake activities that will
significantly affect the intellectual property to which Customer A has rights. Neither does Customer X expect that
Entity A will undertake such activities. Entity A grants the license to Customer X on December 31, 20x1. How much
revenue from the franchise contract will Entity A recognize in 20x1?
Case #2:
The license provides Customer X the right to use Entity A’s patented processes. The agreement requires Customer
X to discontinue using its trade name and instead use Entity A’s trade name. Customer X is bound by the terms of
the contract to abide with Entity A’s policies on the use of the processes but is given the right to any subsequent
modifications to the processes. How much revenue from the franchise contract will Entity A recognize in 20x1?
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