Question

According to the IASB, when is the seller required to recognize revenue over time on intellectual property?

a) When the customer pays in installments
b) When the intellectual property is delivered
c) When the customer uses the intellectual property
d) When the contract expires

Answer 1

c) When the customer uses the intellectual property

The seller must recognize revenue over time on intellectual property when the customer uses the intellectual property, in compliance with the IFRS 15 standards set by the IASB.

Step-by-step explanation:

According to the International Accounting Standards Board (IASB), the seller is required to recognize revenue over time on intellectual property when the customer uses the intellectual property.

This recognition over time reflects that the seller is continually transferring control of the intellectual property to the customer, who is receiving and using the benefits simultaneously. This concept is part of the IASB's revenue recognition standard under IFRS 15, which details how and when to recognize revenue from contracts with customers.

This standard stipulates that revenue can be recognized over time if one of the three criteria is met, one of which includes the customer receiving and using the benefits of the seller’s work as it’s performed.