License fees
In 01, entity E developed new software. The software was not developed for E”s own use. Instead, it is licensed to E”s customers. The software”s useful life is three years.
On Jan 01, 02 (which is identical with the date on which amortization begins), a non-exclusive license agreement is signed with a major customer. The term of that agreement is three years. On Jan 01, 02, E receives a one-time payment of CU 30 from the major customer.
Version (a)
E is obliged to train the major customer”s employees and to perform other important services for the major customer in the years 02–04 relating to the software. This will result in costs of CU 4 p.a.
Version (b)
E has no obligations aside from licensing. If new versions of the software (updates) are released before the end of the licensing arrangement, the major customer only receives this update for the same price as new customers.
Required
Prepare any necessary entries relating to revenue recognition in E”s financial statements as at Dec 31 for the years 01 and 02.