Final answer:
Royalties received by a company from the assignment of a patent should be reported as revenue over the agreed period. For patents, the standard protection period is 20 years, offering innovators time to benefit from their inventions without competition.
Step-by-step explanation:
Reporting Royalties from Patent Assignments as Revenue
When a company enters into a royalty agreement and receives royalties for the assignment of a patent, these royalties are reported as revenue. Patents grant the inventor the exclusive right to manufacture, use, or sell the invention for a finite period, typically 20 years. This incentivizes innovation by allowing the patent holder to earn a return on investment without competition. When a company receives royalties, it is effectively gaining income from allowing another entity to utilize the patent. These royalty payments are recognized as revenue over the period specified in the agreement, which in this case is 3 years.