record master costs

ASC 340-928 governs when a music entity may capitalize advance royalties paid to artists, the cost of record masters, and minimum guarantees paid in advance by licensees. Capitalization hinges on recoverability: an advance royalty or the record company's share of record master cost is an asset only if the artist's past performance and current popularity provide a sound basis for estimating recovery from future royalties or sales. Capitalized amounts are charged to expense as royalties are earned or amortized over the recorded performance's life in relation to expected net revenue, with immediate write-off of nonrecoverable portions.

This Subtopic tells music-industry entities when to expense artist royalties, record master production costs, advance minimum guarantees paid by licensees, and other license fees. The core rule is that artist royalties (adjusted for anticipated returns) are charged to expense in the period the record sale occurs, advances are expensed as royalties are subsequently earned, and any advance or minimum guarantee that appears unrecoverable is expensed when the loss becomes evident (720-928-25-1, 720-928-25-3).