Preparation of Royalty Analysis Table (Excluding Government Subsidy)

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).

• Minimum Rent (Dead Rent):

The guaranteed minimum amount payable by the tenant, irrespective of actual production.

• Actual Royalty:

The royalty earned based on the actual output or sales during the period.

• Short Workings:

The difference between the minimum rent and actual royalty, indicating how much less the tenant paid than the minimum required.

• Cumulative Short Workings:

The total short workings carried forward from previous periods, showing how much is still available to recoup.

• Amount Recouped:

The portion of short workings that the tenant can recover in the current period.

• 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:

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).