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Originals and Copies: Issues and Resolutions in License-to-Use and License-to-Reproduce

Explore the complexities of license-to-use and license-to-reproduce in the production of originals and copies, addressing questions of capital formation and double counting. Decisions made by the AEG are discussed.

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Originals and Copies: Issues and Resolutions in License-to-Use and License-to-Reproduce

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  1. UNECA/UNSD Regional WorkshopNovember 2005Originals and copies UN STATISTICS DIVISION Economic Statistics Branch UNSD/NA/MR 1

  2. Originals and Copies 1993 SNA Position • The production of originals and copies is a two stage process. • The first stage results in the production of an original and the second stage results in the production of copies. • The original is an intangible fixed asset. • The owner may use it directly in production or license others to use, with both uses resulting in consumption of fixed capital of the original by the owner. • The owner may also license other producers to make use of the original in production. In these cases, the owner is treated as providing services to the licensees. These services are recorded as part of the intermediate consumption of the licensees, and as consumption of fixed capital of the original in the accounts of the originator.

  3. Originals and Copies – contd. Issues to be resolved • License-to-use [copies] • Are licenses-to-use new production? • Can these be fixed capital formation? • When payments for this License-to-use is spread over time, should it be treated as a financial lease? • Given the above, is there double counting between the original and copies?

  4. Originals and Copies – contd. Issues to be resolved • License to reproduce • When the licence has the characteristic of an operational lease, should payments be treated as payments for services (and new production)? • When the holder of an original divests himself of responsibility for reproduction and servicing of copies, does this represent the sale of an asset?

  5. AEG decisions: License to use [copies] • Copies generated under licenses to use represent new production. • When they display the characteristics of fixed assets, copies issued under license to use should be recorded as gross fixed capital formation. When payments for a license-to-use are made over several years • Annual license fee for software without a long-term contract be treated as rental • If a large initial payment is followed by a series of smaller annual fees, the initial payment is treated as fixed capital formation and the annual fees as a service charge.

  6. AEG decisions: license to reproduce • When a license to reproduce is issued under terms similar to an operational lease, the payments made are treated as payments for services. • When the holder of an original divests itself of part or all of the responsibility to issue and service copies under licenses to use by means of a license to reproduce, this constitutes the sale of the corresponding part of the asset. • Having two possible treatments for licenses to reproduce could affect the classification of assets (to be considered by Canberra II) and the borderline between goods and services in trade figures. This should be brought to the attention of BOPCOM.

  7. Thank You

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