FASB topic 606 IP: timing of revenue recognize

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#1
Keyad22  
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Bay Area, California
Hi Pros,

Any suggestions regarding FASB topic 606 for the following issue?

Corp US (US corporation) and Corp JP ( foreign corporation) are 100% owned by Parent Corp in BVI.

Corp US loaned an IP to Corp JP for free for 2 years. Corp JP can use the IP for further R&D. If in the year 3, Corp JP starts to sell products using that IP to a third party, Corp JP will start to pay Corp US fee.

Question: When should Corp US starts to recognize revenue under topic 606 in accounting?


Thank you,
 

#2
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Somewhere out there...
is there an agreement in place? GAAP is going to want an agreement I would think... where are the financials being prepared, at a consolidated level, or at the stand-alone US corp level? if the former, I would think GAAP will ignore it.
 

#3
deniz  
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How do you loan IP?

If you dont have a sale or Royalty Agreement in place, you are creating a 367(d) deemed 20-year royalty that is commensurate with income, meaning the IRS can change the numbers whenever they want. The royalty could be an amount per unit sold, a percentage of the profits, a lump sum paid upfront, or some combination of all three of these options. If you dont want to pay the royalty now, base it on the amount per unit sold.
 


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