Right to Use vs. Right to Access (Licenses)
Right to use and right to access are the two categories of licenses of intellectual property (IP) that determine whether license revenue is recognized at a point in time or over time.
Revenue Recognition
Explanation
A right to use grants the customer the IP as it exists when the license is granted. Revenue is recognized at the point in time the customer can use and benefit from the license. A right to access grants the customer access to the IP as it exists throughout the license period. Revenue is recognized over time.
ASC 606 makes the distinction based on the nature of the IP. Functional IP, such as software, has standalone functionality and generally gives a right to use. Symbolic IP, such as brands or logos, derives its value largely from the licensor's ongoing activities and gives a right to access. IFRS 15 instead assesses whether the licensor's activities significantly affect the IP to which the customer has rights. Under both standards, sales- or usage-based royalties are recognized only when the later of the subsequent sale or usage, or satisfaction of the performance obligation, occurs. ASC 606 additionally prohibits recognizing revenue for a renewal before the renewal period begins.
Why It Matters
The classification determines revenue timing for software, media, and brand licensing deals. In SAP RAR, it drives whether a license performance obligation is fulfilled at a point in time or over time.
Related Terms
Performance Obligation · ASC 606 · IFRS 15 · Variable Consideration · SAP RAR
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