QUESTION 20 Assume the same example as question 19 above, except that the prices included in the contract are: • Licence A: a fixed amount of $ 450 • Licence B: a royalty payment of 7.5% of the selling price of the customer’s future sales of products that use licence B. The vendor estimates that the amount of sales-based royalties that it will receive in respect of licence B will be approximately $ 2,250. In this case, although the variable payments relate solely to the transfer of licence B (the subsequent royalty payments), allocating the variable consideration only to licence B would be inappropriate. This is because allocating $ 450 to licence A and $ 2,250 to licence B would not reflect a reasonable allocation based on the stand-alone selling prices of those two licences. Instead, the fixed amount receivable in respect of licence A is allocated to the two licences on the basis of their stand-alone selling prices. This allocation is calculated as: • Licence A: (1,200 / 2,700) x $ 450 = $ 200 • Licence B: (1,500 / 2,700) x $ 450 = $ 250 How would you treat the above?