IFRS 15 Revenue – Entertainment & Media | Annualreporting.info

Revenue from licenses in entertainment and media industry

Under IFRS 15, determining whether a company’s promise to grant a license provides a customer with either a right to access IP or a right to use IP depends on whether a customer can direct the use of, and obtain substantially all of the remaining benefits from, a license at the point in time at which the license is granted.

The nature of a company’s promise in granting a license is a promise to provide a right to access IP if all of the following criteria are met:

  • the contract requires, or the customer reasonably expects, that the company will undertake activities that significantly affect the intellectual property to which the customer has rights;
  • the rights granted by the license
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Contractual restrictions in license arrangements

Many licenses within the entertainment and media industry (E&M industry) include contractual provisions that restrict the licensee’s use of the IP. For example, a license to a film for a two-year period may contain a contractual provision that prohibits the licensee from running the film more than five times over that two-year period. Judgment is required in determining whether contractual restrictions of time, geography, or use:

  1. affect the number of promised goods or services in a contract; or
  2. define attributes of a single promised license.

Contractual restrictions in license arrangements

IFRS 15 requires a company to determine whether the additional rights are an attribute of the license and if not, to apply the guidance for identifying performance obligations. Significant judgment will be required … Read more

Deferred cost | Capitalised costs E&M industry

Other costs to obtain a contract in the entertainment and media (E&M) industry Deferred cost | Capitalised costs E&M industry

Incremental costs to obtain a contract will be capitalized if they are expected to be recovered. Such costs may be expensed as incurred as a practical expedient if the amortization period of the asset, including the initial contract term plus expected renewals, is one year or less.

Companies may be required to capitalize more costs under IFRS 15, such as certain subscription-based businesses that incur commission or agency costs at the time long-term subscriptions are executed. Deferred cost | Capitalised costs E&M industry

Costs subject to capitalization are not just limited to commissions, but also include other costs that are incremental to obtaining the contract with … Read more