ASC

ASC 405-928

Entertainment—Music

405 Liabilities

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In brief

IntermediateRecognitionIndustry-specificSubsequent measurement

This subtopic tells a music licensee how to account for fees owed under a license agreement with the owner/licensor of a record master or music copyright that grants the right to sell or distribute records or music for a stipulated fee. Its single rule: license fees that are not fixed in amount before the agreement expires must be estimated and accrued, license by license.

Key points (5)
  • A licensee may obtain the right to sell or distribute records or music from the owner or licensor of a record master or music copyright for a stipulated fee, and this Subtopic governs the licensee's accounting and reporting for those fees (405-928-05-1).
  • Scope follows the Overall Subtopic scope in Section 928-10-15 (405-928-15-1).
  • Fees required by a licensing agreement that are not fixed in amount prior to the agreement's expiration date must be estimated and accrued by the licensee (405-928-25-1).
  • The estimate and accrual must be made on a license-by-license basis, not in the aggregate (405-928-25-1).
  • An example of such an unfixed fee is the amount owed for free records distributed by a record club in excess of a stipulated number (405-928-25-1).

For students. This is a one-rule industry subtopic: the licensee cannot wait for the fee to become fixed—unfixed license fees must be estimated and accrued as incurred. The common misunderstanding is aggregating estimates across licenses; the guidance requires a license-by-license computation.

license agreementrecord mastermusic copyrightlicensee feesaccrual of estimated feeslicense-by-license basisrecord club free records

Machine-generated study aid for ASC 405-928. Check the source paragraphs below.

405-928-05Overview and Background

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405-928-05-1
A licensee entity may enter into a license agreement with an owner or licensor of a record master or music copyright granting the licensee the right to sell or distribute records or music for a stipulated fee. This Subtopic provides guidance for the accounting and reporting by the licensee of fees paid under such license arrangements.

405-928-15Scope and Scope Exceptions

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405-928-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 928-10-15.

405-928-25Recognition

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Licensee Accounting

405-928-25-1
Any fees required by a licensing agreement (for example, for free records distributed by a record club in excess of a stipulated number) that are not fixed in amount prior to the expiration date of the agreement shall be estimated and accrued on a license-by-license basis by the licensee.

Related subtopics