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Example documentationExample: Sales Contract with Variable License Revenues and Advance

 

You want to represent license sales contracts, which are exploitation-dependent and in which your media company receives an advance from the licensee, usually at the contract start.

Representation in the License Sales Contract

You transfer the film rights to film A to the licensee for a specific period and agree that you will receive 10% of the box office takings. Your company is also to be paid an advance of $10,000 at the contract start.

  1. Maintain advance: When creating the advance item in the license sales contract, you can use item category IVA1 (IPM sales advance) from the Customizing settings, or a similar item category that you define to represent advances.

    • You record the advance of $10,000 with condition type 17V5 (advance IR) or a similar condition type that you define.

    • The system automatically creates a final invoice item as a sub-item for the advance payment item when the contract is saved. This ensures that any remaining values are cleaned in CRM Billing at the end of the contract runtime, and that the corresponding FI postings are triggered. The system uses item category IVA2 (IPM Sales Final Invoice Advance) for the final invoice item in the standard Customizing or a similar item category of your own.

  2. Maintain rights and variable license revenues: Create an item with item category IVM2 (IPM sales rights and royalties item with confirmation) from the Customizing settings provided or a similar item category that you define.

    • Restrict the content of the right within this item.

    • Define new royalties rates within this item. In this case, enter 10% with condition type 17PI (percentage license fee IR) from the Customizing settings provided or a similar condition type that you define.

    • Use the Advance Reference in this item to record the main item generated in step 1 as the reference item for the advance. This places individual items in a relationship for the royalties calculation.

      Note Note

      Billing request items (BRIs) are generated for this rights and royalties item. These BRIs are used to perform periodic settlement of license fees.

      End of the note.

Result

You receive an advance of $10,000 as a result of billing advance items at the contract start.

You receive confirmation data from the licensee throughout the duration of the contract and determine the exploitation-dependent license fee on the basis of this data.

During billing of the BRIs for the rights and royalties item, these exploitation-dependent license revenues are recouped against the advance.