[vodrldnr]

Text book says that royalty revenue is recognized when earned.

“earned = provide goods or service.”

In this sense, is “Earned process” accomplished when the entity, which buy royalty, sells their products by using the royalty ?

and in what case, unearned royalties arise ? is it when buyer of royalty hasn’t sold there product using royalty after paying advance ?

[Missy]

Think of royalty this way:

You”re an actor in a television sitcom. I pay you $12,000 for the rights to rebroadcast that sitcon for the next 12 months, thats a royalty payment because you're not acting in the same sitcom again but being paid to use your image and work yuo've already done.

Because there's a 12 month time period associated with that payment you “earn” $1,000 per month even if I pay it all up front.

So each month you earn 1/12 of the payment I already gave you and you can move it from your balance sheet to your income statememnt.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[vodrldnr]

so you are referring “rebroadcasting” is for me to provide goods or service(earning process) ??

[Author]

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