by Preparing a Royalty Analysis Table is essential for analyzing the royalty payments between a landlord (licensor) and a tenant (licensee). The table helps track the calculations of minimum rent, actual royalty, short workings, and the recoupment of short workings over specific periods.
Components of the Royalty Analysis Table:
- Period:
The time frame for which the royalty analysis is being conducted (e.g., monthly, quarterly, annually).
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Minimum Rent (Dead Rent):
The guaranteed minimum amount payable by the tenant, irrespective of actual production.
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Actual Royalty:
The royalty earned based on the actual output or sales during the period.
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Short Workings:
The difference between the minimum rent and actual royalty, indicating how much less the tenant paid than the minimum required.
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Cumulative Short Workings:
The total short workings carried forward from previous periods, showing how much is still available to recoup.
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Amount Recouped:
The portion of short workings that the tenant can recover in the current period.
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Net Royalty Payment:
The final amount payable by the tenant after considering the recoupment of short workings.
Sample Royalty Analysis Table
Here’s an example of a Royalty Analysis Table for a three-year period:
| Period | Minimum Rent (₹) | Actual Royalty (₹) | Short Workings (₹) | Cumulative Short Workings (₹) | Amount Recouped (₹) | Net Royalty Payment (₹) |
| Year 1 | 100,000 | 80,000 | 20,000 | 20,000 | 0 | 100,000 |
| Year 2 | 100,000 | 90,000 | 10,000 | 30,000 | 10,000 | 90,000 |
| Year 3 | 100,000 | 120,000 | 0 | 30,000 | 30,000 | 90,000 |
Explanation of the Table:
- Year 1:
The minimum rent is ₹100,000, but the actual royalty is only ₹80,000. The short workings for this year are ₹20,000 (₹100,000 – ₹80,000). Since there are no previous short workings to recoup, the net royalty payment remains ₹100,000.
- Year 2:
The minimum rent remains the same at ₹100,000, but the actual royalty has increased to ₹90,000, resulting in short workings of ₹10,000. Cumulative short workings are now ₹30,000 (previous ₹20,000 + current ₹10,000). The tenant recoups ₹10,000 in this period, leaving a net royalty payment of ₹90,000.
- Year 3:
The actual royalty exceeds the minimum rent, reaching ₹120,000. There are no short workings for this period (minimum rent is covered), but the cumulative short workings remain at ₹30,000. The tenant can recoup the entire ₹30,000 this year, resulting in a net royalty payment of ₹90,000 (₹120,000 – ₹30,000).
