Tran Technologies licenses its intellectual property to Lyon Industries. Terms of the arrangement require Lyon

to pay Tran $500,000 on April 1, 2016, when Lyon first obtains access to Trans intellectual property, and then

to pay Tran a royalty of 4% of future sales of products that utilize that intellectual property. Tran anticipates

receiving sales-based royalties of $1,000,000 during 2016 and $1,500,000/year for the years 20172021. Assume

Tran accounts for the Lyon license as a right of use, because Trans actions subsequent to April 1, 2016, will

affect the benefits that Lyon receives from access to Trans intellectual property.

Required:

1. Access the FASB Accounting Standards Codification at the FASB website ( asc.fasb.org ). Identify the specific

citation for accounting for variable consideration arising from sales-based royalties on licenses of intellectual

property, and consider the relevant GAAP. When can Tran recognize revenue from sales-based royalties associated

with the Lyon license?

I looked up the codifications and the furthest I got to was 606-10-55-65 but I wanted to make sure it is correct