Licensing establishes a customer’s rights to the intellectual property of an entity. Licenses of intellectual property may include, but are not limited to, licenses of any of the following:
- Software (other than software subject to a hosting arrangement) and technology
- Motion pictures, music, and other forms of media and entertainment
- Franchises Licensing
- Patents, trademarks, and copyrights. Licensing
In addition to a promise to grant a license (or licenses) to a customer, an entity may also promise to transfer other goods or services to the customer. Those promises may be explicitly stated in the contract or implied by an entity’s customary business practices, published policies, or specific statements. As with other types of contracts, when a contract with a customer includes … Read more
Fair value of decommissioning obligation is about a nice example of decommissioning a large oil platform.
In the oil and gas industry, it is important to plan ahead and consider how decommissioning large-scale assets such as rigs will be carried out in years to come. Specifically, you need to work out how to account for the current value of what you’ll be spending in the future. With depleting oil prices since 2014 from their glory days of $100 plus and the resulting volatility and uncertainty that has brought to the industry, being able to meet and estimate that obligation has never been more critical.
In this post, the obligations under the International Financial Reporting Standards (IFRS) will be discussed and … Read more
Fair value of a liability provides a practical case showing how fair value of liabilities is measured in slightly more complicated transactions.
The Case Fair value of a liability
Assume that Entity X and Entity Y each enter into a contractual obligation to pay cash (€500) to Entity Z in five years. Entity X has a AA credit rating and can borrow at 6 per cent, and Entity Y has a BBB credit rating and can borrow at 12 per cent. Fair value of a liability
Entity X will receive about €374 in exchange for its promise (the present value of €500 in five years at 6 per cent). Entity Y will receive about €284 in exchange for its promise … Read more
Valuing a Research and development project is an example of a special project in IFRS 3. The reporting entity acquires a research and development (R&D) project in a business combination. The entity does not intend to complete the project.
If completed, the project would compete with one of its own projects (to provide the next generation of the entity’s commercialized technology). Instead, the entity intends to hold (i.e., to lock up) the project to prevent its competitors from obtaining access to the technology. In doing this, the project is expected to provide defensive value, principally by improving the prospects for the entity’s own competing technology.
To measure the fair value of the project at initial recognition, the highest and best … Read more
The Objective of General Purpose Financial Reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. Those decisions involve buying, selling or holding equity and , and providing or settling loans and other forms of credit.
“Financial Reporting is a practical exercise in communication not a theoretical or academic construct. We should not lose sight of the importance of financial statements as a tool for communication; currently we are losing the audience as they are becoming too complex.” – The Hundred … Read more
What is a Business Model? is about whether the asset is part of a group or portfolio that is being managed within a business model whose objective is to collect contractual cash flows from the non-equity financial asset (Amortised Cost), or to both collect contractual cash flows from the non-equity financial asset and sell the non-equity financial asset (FVOCI). Otherwise, the asset is measured at FVPL (see summary schedule below). What is a Business Model?
An entity’s business model for managing financial assets:
- reflects how financial assets are managed to generate cash flows
- is determined by the entity’s
Case value intangibles in business combinations provides a comprehensive business case of valuation of an of a regional provider of professional services, ProfServCo. The following intangible assets were identified as of the date of the combination:
- Trade name Case value intangibles in business combinations
- Service concession number Case value intangibles in business combinations
- Customer relationships Case value intangibles in business combinations
- Non-competition agreements. Case value intangibles in business combinations
ProfServCo was acquired as part of a business combination under IFRS 3 by AcquiCo on 30 September 20×2.
1. Trade name
ProfServCo operates in a region of the United States and has been a leading provider in … Read more
Changes in contracted transaction price under IFRS 15 can occur for various reasons. The standard requires entities to determine the
transaction price at contract inception. However, there could be changes to the transaction price after contract inception. For example, when a contract includes variable consideration, entities need to update their estimate of the transaction price at the end of each reporting period to reflect any changes in circumstances. Changes in the transaction price can also occur due to contract modifications. Changes in contracted transaction price under IFRS 15
Changes in the total transaction price
As stated in IFRS 15 88-89, changes in the total transaction price are generally allocated to the performance obligations on the same basis … Read more
IFRS 15 Contracts with customers defines a contract as an agreement between two or more parties that creates enforceable rights and obligations.
Based on IFRS 15.9, an entity should account for a contract with a customer that is within its scope only when all of the following criteria are met:
- The parties to the contract have approved the contract and are committed to perform their respective obligations.
- The entity can identify each party’s rights regarding the goods or services to be transferred.
- The entity can identify the payment terms for the goods or services to be transferred.
- The contract has commercial substance. IFRS 15 Contracts with customers
- It is probable that the entity will collect substantially all of the
