Licences of intellectual property under IFRS 15

Software, films, music, brands, patents and franchises are all licensed. The question for revenue is whether the customer receives IP as it stands on day one or the right to IP that the licensor will keep changing. This guide explains the test, the royalty exception and where US GAAP differs.

By Mirza Fahad Baig, Chartered Accountant. Reviewed by Hamza Fida, Chartered Accountant. Checked against official sources on . 3 minute read.

Short answer

Under IFRS 15, licences of intellectual property fall into two types. A distinct licence is either a right to access the IP, recognised over time, or a right to use it, recognised at the point in time the licence starts. It is a right to access if the licensor is expected to undertake activities that significantly affect the IP, the customer is exposed to those effects, and the activities do not themselves transfer a good or service. Sales-based royalties are recognised only as the sales occur.

At a glance

Right to use
Revenue at a point in time
Right to access
Revenue over time
Key test
Licensor activities affecting the IP
Royalties
Recognised as sales occur
Licence not distinct
Part of a combined obligation
US GAAP
Functional or symbolic IP
Licences of intellectual property under IFRS 15Right to use: Revenue at a point in time; Right to access: Revenue over time; Key test: Licensor activities affecting the IP; Royalties: Recognised as sales occur; Licence not distinct: Part of a combined obligation; US GAAP: Functional or symbolic IP.KEY FACTS AT A GLANCELicences of intellectual property under IFRS 15Right to useRevenue at a point intimeRight to accessRevenue over timeKey testLicensor activitiesaffecting the IPRoyaltiesRecognised as sales occurLicence not distinctPart of a combinedobligationUS GAAPFunctional or symbolic IPChecked against official sourcesTax BakersLicences of intellectual property under IFRS 15Right to use: Revenue at a point in time; Right to access: Revenue over time; Key test: Licensor activities affecting the IP; Royalties: Recognised as sales occur; Licence not distinct: Part of a combined obligation; US GAAP: Functional or symbolic IP.KEY FACTS AT A GLANCELicences of intellectual propertyunder IFRS 15Right to useRevenue at a point in timeRight to accessRevenue over timeKey testLicensor activities affecting the IPRoyaltiesRecognised as sales occurLicence not distinctPart of a combined obligationUS GAAPFunctional or symbolic IPChecked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

Is the licence distinct?

First apply step 2. A licence that is not distinct, because it is an input to a combined offering such as software that only works with the company's hosting service, is accounted for as part of that combined performance obligation. The licence guidance below applies to distinct licences, and to licences that are the main item in a combined obligation.

Right to access or right to use?

Right to access or right to use?Right to access or right to use?Will your activities significantlyaffect the licensed IP?NoRight to use:point in timeYesIs the customer exposed tothe effects of those activities?NoRight to use:point in timeYesDo the activities avoidtransferring a separate service?NoRight to use:point in timeYesRight to access: over time
All three must be met for a right to access. Otherwise the licence is a right to use.

The licence is a right to access if all three of these are true: the contract requires, or the customer reasonably expects, the licensor to undertake activities that significantly affect the IP; the rights granted directly expose the customer to the positive or negative effects of those activities; and the activities do not transfer a separate good or service to the customer as they occur. Otherwise the licence is a right to use the IP as it exists when the licence is granted.

Activities significantly affect the IP when they are expected to change its form or functionality, or when the IP's value depends on them, as a brand's value depends on how the owner manages it.

Examples

LicenceLicensor activitiesTypeRevenue
Perpetual licence for standard softwareNone that affect the licensed version; updates sold separatelyRight to useWhen the customer can use the software
Licence of a completed film for five yearsNone expectedRight to useWhen the licence period starts
Franchise to use a restaurant brandOngoing marketing and brand managementRight to accessOver the franchise term
Sports team logo on merchandiseThe team's results and conduct affect the logo's valueRight to accessOver the licence term

A worked example: a software licence with support

A company sells a perpetual licence to its standard accounting software for CU 50,000 and two years of support, including updates when available, for CU 20,000. Both are distinct. The licence is a right to use the software as it exists, so CU 50,000 is recognised when the customer can download and use it. The support is a separate service, so CU 20,000 is recognised evenly over two years. If the contract price differed from the stand-alone prices, it would first be allocated as in allocating the transaction price.

How are sales-based royalties treated?

For a licence of IP, consideration based on the customer's sales or usage is recognised only when the later of two events occurs: the sale or usage happens, or the performance obligation to which the royalty relates is satisfied. A music label licensing a song for a share of streaming revenue therefore recognises revenue as the streams happen, not by estimating future streams. This exception applies only when the licence is the main item to which the royalty relates.

What about renewals and restrictions?

Revenue for a renewal of a right-to-use licence is not recognised before the renewal period begins. Restrictions of time, territory or use define the attributes of the licence; they do not create separate obligations.

How does US GAAP differ?

ASC 606 reaches the same answers in most cases but by a different route: it classifies IP as functional, such as software or film, usually recognised at a point in time, or symbolic, such as brands and logos, always recognised over time. Differences can arise for licences near the boundary. See IFRS vs US GAAP: the key differences.

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Questions people ask

When is licence revenue recognised under IFRS 15?

Over time for a right to access the IP, and at the point the licence starts for a right to use it.

What makes a licence a right to access?

Licensor activities that significantly affect the IP, expose the customer to their effects, and do not transfer a separate good or service.

How are sales-based royalties on a licence recognised?

Only when the related sales or usage occur, or the related performance obligation is satisfied if later.

How does US GAAP treat licences?

It classifies IP as functional or symbolic. Symbolic IP is recognised over time; functional IP usually at a point in time.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 15 Revenue from Contracts with Customers

Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.

IFRS 15Identifying performance obligations under IFRS 15IFRS 15Allocating the transaction price using stand-alone selling pricesIFRS 15IFRS 15 revenue from contracts with customers explained

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This guide is general information. It is not tax or legal advice for your situation.