Question

Determining Performance Obligations, Estimating Transaction Price. Shownow Film Company grants a customer the rights to broadcast three films under a single licensing agreement. The arrangement includes a fixed fee of $90,000. The arrangement provides for an even reduction in the film license fee if the third him is not completed and made available for delivery. Shownow determines that it is 80% likely that it will deliver the third film on time.

Answer 1

Under licensing agreement there are two parties namely licensor and licensee. In which the main objective of licensor is to provide digital information in usable form to the licensee.

The performance obligations of licensor (the person who rendering services or agree to provide license to the material information to licencee) under licensing agreement are stated below;

#to provide licensed material to the licensee,

#provide licensee to access the digital material information,

And major obligations of performance by licensor based on the way/form of supplying such material information to licencee.

He can supply by way of online access to the licencee(then licensor should provide uninterrupted and complete access to it) or

By way of providing copy of such information by electronic transfer medium such as DVD's,CD's etc(licensor should provide proper copy of it, and adequate software to access it)

Now come to transfer pricing:;

Transfer pricing can be described as setting up of price of good and services while transfer them from one responsibilities centre to another under the same control,

Example:

XYZ ltd is having five departments(we can call these departments as related parties or responsibility centres) in various different countries, while transferring goods produced from one to another, at which price they transfer is called transfer price.

Thank you:-)

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