toxic waste / Re: Revenue recognition
in response to
by
posted on
Jan 23, 2013 09:34PM
Rather than milestones that are related to some future unknown legal development or ruling, let me suggest a more likely scenario to which that clause would apply and one reason it has been included.
For example, let's say that Company A is in talks with PDS to buy an MMP license. Concurrently, or perhaps some time in the future, let's assume Company A is in negotiations with or will likely acquire an additional non-MMP-licensed company (or companies). Rather than be subjected to renegotiating an MMP license based on a fully validated, and possibly also successfully litigated MMP later on down the road, and paying what would likely be higher fees and/or tougher negotiations, consider that Company A may decide to negotiate the fees for future acquisitions based on the current still uncertain status of the MMP, rather than on a post verdict or large settlement MMP status that might occur in the future.
Once that "milestone" of acquisition of Company B is met, the revenues for that would then be due. In this case, the exposures are "fixed" at the time of settlment.
That's just one example that, IMO, would be orders of magnitude more likely than revenues contingent on the unknown future legal development. I say that because the legal developments and multiple headed contingencies and possibilities could never really all be considered and negotiated into any "contingent" license that would practically address the potentialities of the future.