Omega Pharmaceuticals Inc. licenses its patent rights for North America to an approved drug compound for five years to Crane Distributing Ltd. Omega determines that the patented drug formula has significant stand-alone value. Under the terms of the licensing agreement, Omega has no obligations to support the drug formula over the five years of the agreement.

Instructions

When should Omega recognize revenue from the licensing agreement: at one point in time or over the five-year term of the agreement? Explain.