Register now or log in to join your professional community.
Received then Income and spent then expense, but can it be an intangible assest?
Royalty: Some businesses entities have financial relationships in which one shares the revenues earned through use of an asset owned by the other. Essentially, it is a lessee/lessor relationship, though the terms licensee and licensor are more common. These usage-based payments are called royalties, and they typically consist of a percentage of the revenues brought in by the asset. The accounting details of a royalty agreement, as presented in the contract, dictate how royalties are calculated.
Price Per Unit
Some arrangements call for a fixed percentage of profit per unit of asset sold. For example, a book publisher might agree to pay an author a percentage of the proceeds of every book of hers it can sell. If the author receives an up-front payment, or advance, the publisher will deduct that from future royalty payments.
Minimum Rent
Some royalty arrangements have variable payments that guarantee the licensor some profit. The licensee agrees to pay the greater of a royalty payment or a fixed sum, known as minimum rent. During periods when the royalty payments would be low, the licensee pays the minimum rent, also known as dead or flat rent.
Net Revenues
Other arrangements call for a fixed percentage of net revenues after certain outlays. For example, the miner might deduct the costs of equipment maintenance from the value of the gold she finds and then pay a percentage of the lower amount.
