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How to account for a Sublicense fee paid in installments?

Has anyone had experience accounting for a sublicense fee agreement payable in installments? We recently entered into a sublicense agreement that had an upfront payment and four annual installments (let's use an example: $100K, plus four $25K payments) Our initial assessment was to book the upfront fee and the annual installments to intangible assets, with special accounting treatment: The future payments would be booked as a liability, with the net liability discounted back using present value. The discount would offset the liability and accrete over the years (similar to bond accounting). Therefore, using the example payment scheme, the intangible asset would be booked at $184,680 ($100K, plus PV of four $25K payments using 7% discount). The $16,320 "discount" would be booked as the contra-liability discount to the underlying liability. Some have suggested that it should just be expensed rather than treated as an intangible. Thanks!


Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

I would suggest you discuss this with your Auditor.


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