# ASC 405-928-05: Liabilities — Entertainment—Music — 05 Overview and Background

Source: FASB Accounting Standards Codification, Basic View

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## ASC 405-928-05: 05 Overview and Background

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##### [405-928-05-1](https://asc.understandingaccounting.org/asc/405/928/#405-928-05-1)

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A licensee entity may enter into a [license 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.") with an owner or licensor of a [record master](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.") 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.