Joe: If Ovonics receives money as a one time license fee, that is definitely taxable income in the quarter received. If the money is called prepaid royalties, with Sanyo having no rights to the money back if shipments are too low to justify the number, then that is treated the same way.
However, if the money is called prepaid royalties, and Sanyo DOES have the right to get the money back in certain circumstances, then the accounting would be like this; When the check comes in, cash goes up by that amount, and that is offset by a liability called "unearned revenue"; initially, there is no effect on the income statement. As the batteries get shipped and royalties are earned, royalty income shows up on the income statement and an equal figure is subtracted from the unearned revenue account on the balance sheet.
If the Ovonics subsidiary sold stock to Sanyo that will have no effect on ENER's income statement, unless there is now some compelling reason for ENER to change the value of its holdings in Ovonics.
PS. I am not an accountant, so I may be wrong. |
