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Hi
Can you please explain how the granting of the licence should be accounted for by Agency Co?
On 1 January 20X7, Agency Co granted (sold) Kokila Co a licence with no end date to sell a headache (Headon) in South America. Agency Co has retained the rights to sell Headon in the rest of the world. The South market’s relative value compared to the rest of the world is 20%The process used to produce Headon is not specialised and several other could also it for Kokila Co. Kokila Co will purchase Headon directly from Agency Co at cost plus 50%. The product has been sold for many years. On 1 January 20X7, Kokila Co made an up-front of $15 million and will make an 20X7make payment of $3 million when South American sales exceed $35 million. Agency Co had correctly costs for Headon as an asset at a amount of $30 million.
Thanks in advance!
On 1 Jan x7, recognise revenue likely to be received: 15 definitely plus 3 depending on forecast sales.
Please make your questions more specific and don’t copy out whole questions. 🙂
Sir, in the answer given they have mentioned that a gain of 9m is recognised on disposal of the south American development costs
I didnt understand why we are disposing the development costs
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