CERTYNEX IFRS ACADEMY

Quintarel buys from an inventor, for a cash payment of 120,000, a patent on a filtration system. The amount and timing of future sales of the products using the patent are uncertain. Why are both recognition criteria regarded as met?

The price reflects Quintarel's expectations about the probability of benefits, and a cost settled in cash can generally be measured reliably.

The inventor has guaranteed a minimum sales volume, which makes the amount and timing of the patent's future benefits certain.

A patent is always traded in an active market, whose published prices prove both the probability of benefits and the reliability of cost.

Only the reliable-cost criterion is met automatically; the probability of benefits must be demonstrated by a detailed business plan before any recognition.