Royalty advances are payments made or received against future royalty earnings.
For publishers, under GAAP, payments to authors for royalty advances are recorded as assets. Under IFRS royalty advances paid to authors are recorded as assets only if paid to proven authors and the project is a “GO”; otherwise they are expensed.
Royalty advances received may be refundable or non-refundable.
Refundable royalty advances are credited to the liability account: Unearned Advances. This balance is reduced as royalty earnings are reported.
Non-refundable advances are treated as income.