NFT Secondary Sale Royalty Income
Recording royalty income earned automatically when an NFT is resold on a secondary marketplace.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Crypto Asset (Royalty Received) | Asset (+) | 5,000.00 | - |
| NFT Royalty Income | Revenue (+) | - | 5,000.00 |
💡 Accountant's Note
NFT smart contracts can be programmed to automatically remit a royalty percentage (typically 5-10%) to the original creator on every secondary sale. This royalty is paid automatically by the marketplace smart contract and received in the creator's wallet. Revenue is recognised at the time of receipt as the performance obligation (creating the NFT) was previously satisfied.
Practitioner & Systems Framework
💻 ERP Architecture
NFT royalties are received automatically in the creator's cryptocurrency wallet every time the NFT changes hands on a secondary marketplace. The royalty receipt is tracked through on-chain analytics tools that monitor the creator's wallet for incoming royalty payments. Revenue is recognised at the fair value of the cryptocurrency received at the time of receipt. Note: royalty enforcement on secondary NFT sales is a contested area — some marketplaces have made royalties optional, which may reduce expected future royalty income materially and requires disclosure.
⚠️ Audit Flags
Auditors obtain the wallet transaction history for royalty receipts, confirmed through blockchain explorer tools. Test the royalty percentage received against the NFT smart contract's configured royalty rate. For secondary royalty income, assess whether it constitutes 'usage-based royalty' income under IFRS 15 — recognition at the time the secondary sale occurs (when the royalty is earned and receivable). Review whether marketplace policy changes on royalty enforcement have materially affected royalty income and whether this requires disclosure as a business risk.
📄 Required Documentation
NFT smart contract royalty configuration (royalty percentage, recipient address), wallet transaction history (royalty receipts), on-chain analytics report of secondary sales, spot price at royalty receipt timestamp, secondary marketplace royalty enforcement policy, and royalty income trend analysis.
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