# ASC 340-928-05: Other Assets and Deferred Costs — Entertainment—Music — 05 Overview and Background

Source: FASB Accounting Standards Codification, Basic View

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## ASC 340-928-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/340/928/#05-overview-and-background)

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##### [340-928-05-1](https://asc.understandingaccounting.org/asc/340/928/#340-928-05-1)

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A [licensing agreement](https://asc.understandingaccounting.org/glossary/l/#license-agreements "Contractual arrangements entered into by an owner (licensor) of a record master or music copyright with a licensee granting the licensee the right to sell or distribute records or music for a fixed fee paid to the licensor or for a fee based on sales of records or music. License agreements are modifications of the compulsory provisions of the copyright law.") may require [advance royalties](https://asc.understandingaccounting.org/glossary/a/#advance-royalty "An amount paid to music publishers, record producers, songwriters, or other artists in advance of their earning royalties from record or music sales. Such an amount is based on contractual terms and is generally nonrefundable.") to be paid to artists and [minimum guarantees](https://asc.understandingaccounting.org/glossary/m/#minimum-guarantee "An amount paid in advance by a licensee to a licensor for the right to sell or distribute records or music.") to be advanced to licensors. This Subtopic addresses the accounting for such royalties and guarantees by an entity in the music industry. It also addresses the accounting by such entities for the costs to produce [record masters](https://asc.understandingaccounting.org/glossary/r/#record-master "The master tape resulting from the performance of the artist. It is used to produce molds for commercial record production and other tapes for use in making cartridges, cassettes, DVDs, and reel tapes. The costs of producing a record master include the cost of the musical talent (musicians, vocal background, and arrangements); the cost of the technical talent for engineering, directing, and mixing; costs for the use of the equipment to record and produce the master; and studio facility charges. Under the standard type of artist contract, the record company bears a portion of the cost and recovers a portion of the cost from the artist out of designated royalties earned. However, either party may bear all or most of the cost.").