Document ID: chunk:federal_register_of_legislation:F2023C00402:reg:97:p39
Version: federal_register_of_legislation:F2023C00402
Segment Type: reg
Provision Reference: reg 97 (pt 39/56)
Character Range: 366754–370582

licences: Add implementation examples to help licensors apply (i) and (ii).      (ii)       Recognise revenue for all licences (IP and non-IP) over time[2];
                                                                                                                                                                                                                                           (iii)     Recognise revenue for all short-term licences (≤1 year)  at a point in time (upfront) and all long-term licences (>1 year) over time2; or
                                                                                                                                                                                                                                           (iv)      Recognise revenue for all low-value licences at a point in time (upfront) and all high-value licences over time.2
Likely revenue recognition outcome      * IP: either over time or point in time, depending on circumstances                           * IP: either over time or point in time, depending on circumstances                                   * IP and non-IP: either over time or point in time depending on the practical expedient chosen                                                          * Licence component: either over time or point in time depending on circumstances
                                        * Non-IP:  likely point in time (upfront)                                                     * Non-IP:  likely point in time (upfront)                                                                                                                                                                                                                     * Tax component: recognised under AASB 1058

Accounting for revenue from licences under AASB 15 – the chosen option
     BC74            After consideration of each of the four possible options, the Board decided option 2 was the most suitable, with some modifications for low-value and short-term licences (see later in this paragraph). The primary reason for the decision is that option 2 is comparatively easier to apply than option 1 (especially for non-IP licences) and option 4 and it is the most consistent with a transaction neutral approach. The Board was concerned that because of the challenges in applying option 1 to non-IP licences and applying option 4 to all licences, inconsistencies could arise if applied in practice.  Option 3 offered convenient sub-options, each of which would result in consistency in practice. Therefore the Board decided to modify option 2 to allow licensors the option of adopting practical expedients for low-value or short-term licences (including IP licences – see paragraph BC83), consistent with the precedent set in AASB 16.  The Board also decided to specify that in applying the low-value option, arrangements with contingent consideration are not eligible as the Board observed that in most cases this would increase the overall transaction price significantly (and hence would not be of low-value).

     BC75            The discussion below sets out the Board's rationale in effecting the chosen option, including the principles of AASB 15 for which the Board decided to develop guidance.

BC1

Recognition exemptions for low-value and short-term licences
     BC76            As noted in paragraph BC74, the Board proposed practical expedients for low-value or short-term licences in ED 283 consistent with the precedent in AASB 16. This included providing guidance for applying the requirements to low-value licences, but not short-term licences (nor did the Board propose a definition of a 'short-term licence').  The majority of respondents to ED 283 supported the provision of practical expedients for short-term