A is corrent. Per SFAC 5, revenues are considered to be "earned" when the entity has substantially completed the duties entitling it to the benefits represented by the revenues. When a company assigns patents to other enterprises, it earns royalties as the sales of patented products are made. Therefore, these royalties should be reported as revenue in the period in which they are earned.
B is incorrect. The company that holds the patent has earned the royalties from its patent assignment. Per SFAC 5, revenues are considered to be "earned" when the entity has substantially completed the duties entitling it to the benefits represented by the revenues. When a company assigns patents to other enterprises, it earns royalties as the sales of patented products are made. Therefore, these royalties should be reported as revenue in the period in which they are earned.
C is incorrect. The assignment of the patent has no effect on the carrying value of the patent. Per SFAC 5, revenues are considered to be "earned" when the entity has substantially completed the duties entitling it to the benefits represented by the revenues. When a company assigns patents to other enterprises, it earns royalties as the sales of patented products are made. Therefore, these royalties should be reported as revenue in the period in which they are earned.
D is incorrect. The assignment of the patent has no effect on the related amortization expense. Per SFAC 5, revenues are considered to be "earned" when the entity has substantially completed the duties entitling it to the benefits represented by the revenues. When a company assigns patents to other enterprises, it earns royalties as the sales of patented products are made. Therefore, these royalties should be reported as revenue in the period in which they are earned.
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