Page 63 - Accountancy for Advanced Secondary Schools Teachers Guide Form Five

2. Types of royalties
(a) Intellectual property royalties: Cover royalties from
patents, trademarks, copyrights, and trade secrets.

FOR ONLINE READING ONLY
(b) Resource royalties: Discuss royalties related to the extraction
of natural resources like oil, gas, minerals, and timber.

(c) Franchise royalties: Explain royalties from franchising
agreements.
(d) Music and media royalties: Introduce royalties from music,
film, and other media.

3. Accounting for royalties

(a) Accrual basis vs. cash basis: Explain the difference between
accrual and cash basis accounting in the context of royalty
payments.

(b) Recognition of royalty income: Teach when and how royalty
income should be recognised in the accounts of the licensor.

(c) Expense recognition: Discuss how and when licensees
should recognize royalty expenses.
4. Royalty agreements

(a) Key terms and conditions: Explain the essential components
of royalty agreements, such as royalty rates, payment
schedules, minimum payments, and recoupable advances.

(b) Variable royalties: Discuss royalties that vary based on
factors like sales volume or production levels.

5. Calculation and reporting

(a) Royalty Calculations: Provide teaching methods for
calculating royalties based on percentage of sales, units
produced, or other metrics as specified in the agreement.

Teacher’s Guide Form Five
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