IFRS 15 in the Spotlight: Variable consideration & the sales-based or usage-based royalty exception

• 25 October 2022
• by: Admin
• in: Bookkeeping
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Our team undertakes audits across the globe, including Europe, America, Asia, Australasia and Africa, and our staff have a range of international language and cultural skills. Languages currently covered by our team include Japanese, Mandarin, Cantonese, Taiwanese, Indonesian, Malaysian, Italian, Spanish, French, German, Portuguese and Hebrew. This means that when we undertake an audit we are able to interact fully https://grindsuccess.com/bookkeeping-for-startups/ with licensees and their employees. Our team takes pride in the validity of our findings, ensuring clients receive maximum commercial and financial benefits from an audit. It is this that underpins much of the vast amount of under-reporting we have uncovered over the years rather than wilful suppression of royalties. Anyone that has worked in royalties at a record label knows royalty accounting isn’t simple.

It can also uncover contractual interpretation issues, especially when deals have been written in the pre-digital age. At HW Fisher, we have industry experience spanning decades and we understand the changes in the music industry over time. It’s this knowledge and experience that often results in recoveries of additional royalties to you via a royalty audit.

Conduct Committee findings in relation to accounting under IAS 18

This article explains an exception to variable consideration treatment for certain licences of intellectual property (IP). The way musicians get paid for digital streams is quite confusing but, as accountants for digital musicians, we’ve waded through this complicated territory before. Read on for our easy-to-understand guide on how to calculate royalties for your digital music. We are aware of the paramount importance of the long and established relationships between brand owner and licensee. While our approach is always extremely professional, during fashion audits we are particularly careful to work closely with the licensee and include them in the audit process, helping to ensure the relationship is maintained. In addition, we are experts in music catalogue valuations and related royalty due diligence services acting for both the proposed buyer or seller of music rights and royalty income flows.

• There are many different websites that advertise work experience and internships within the music industry, such as The Big Music Project, UK Music and Arts Council England.
• When it comes to planning for the future, with the help of our expansive professional network, we’ll put you in touch with reliable overseas accountants and tax advisors.
• A royalty audit, by definition, is a review of a licensee’s performance over a given period, and whether they have complied with the terms set out in their contract.
• We will ensure your discographies are up to date, complete and accurate worldwide.
• Head of Music Royalty Audits Robert Fowler discusses the complexities of royalty accounting and why a royalty audit could unlock additional revenue.

These Artists, Performers, Music Publishers, Record Companies and Writers have trusted us as their royalty auditors to maximise their royalty income over the past 25 years. Mgr works with international touring artists of all shapes, sizes and genres to help steer their tours through the minefield of withholding tax, social security and related issues. Whether you’re a global superstar performer, a songwriter, or a major corporate player, mgr’s specialist music team is here to help. From helping you to manage your production costing and licensing, to ensuring you have the most robust systems, mgr’s entertainment team is on your side. We always aim to support our clients for the entirety of their careers and beyond. When it comes to planning for the future, with the help of our expansive professional network, we’ll put you in touch with reliable overseas accountants and tax advisors.

Central Withholding Agreements

We have also conducted many distribution audits in UK, USA, Europe and Australia for record companies based in UK and elsewhere. Our dedicated entertainment and media team put over 40 years’ specialist experience at your disposal. Optimise your income and tax position today and manage your personal wealth efficiently tomorrow. Our team can help you or your company with every aspect of your personal and business finances. This might be running the finances for a rock band’s global tour, collecting merchandising royalties for a Premier League football club or managing a celebrity vlogger’s day-to-day bank accounts.

The amount an artist gets paid – and when – comes down to the agreement they strike with the rightsholders. First, there are recording royalties, which are paid to the rightsholder of a recording. Then, there are publishing royalties, which is the money owed to the songwriter(s) or owner(s) of an original composition. Our team acts for many prestigious names in fashion, from high street labels to luxury brands.

What’s a Royalties Assistant good at?

There’s one other party that we haven’t covered yet, and they play an important role in getting an artist’s music out to the world. The additional artists that helped in the production of music, whether they are featured on the track or not, are also entitled to royalties. Instead, what your rightsholders get depends on their share of total streams on a platform.

In the above example, the entity will recognise revenue of £1.5m when, or as, control of the licence passes, and the additional £0.5m/£1.0m in the period(s) that the customers’ sales exceed the cumulative £100m / £200m targets. Following the legal form of the royalty might not appropriately depict progress in satisfying its performance obligation for providing access to the entity’s IP as it may exist from time to time throughout the licence period. This may require an element of estimation of sales/usage-based royalties where there is a timing difference between the sale or usage occurring, and when these reports by the customer are received by the licensing entity.

Who needs a royalty audit?

We’ll work with your manager to handle budgets, business management and administration throughout the tour. We’ll also liaise with agents and promoters, and by the end of the tour we’ll have created the accounts and registered any taxes you need to pay. We’re passionate about changing the way music accounting is done, so you spend less time on admin and more time being creative.

This is partly because almost every deal is bespoke and crafted to meet the nuances of each individual show. In addition, the production company needs to collate all the relevant income, which may be generated from an ever widening variety of deals and sources, such as VOD, airlines and international deals. Each client has their own particular needs and challenges, so we shape the strongest team for them, with the right match of industry knowledge, technical expertise and personalities. We become integral to the day to day running, decision-making and strategic direction of their businesses.