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%. 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%.
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?
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