Example of an Immaterial Change Due to an Upgrade
This example illustrates how to populate the immaterial change-related attributes to reflect an upgrade to a plan by terminating an existing plan and adding a new plan.
The initial customer contract has three performance obligations for telephone, voice plan, and data plan. The phone is subsidized, and the voice and data plans cover a 24-month subscription period. The data plan is upgraded from 5 gigabytes to 10 gigabytes starting from the beginning of the fourth month.
The company wants to treat this as an immaterial change and:
- Terminate the initial 5-gigabyte data plan performance obligation.
- Add a new performance obligation to the existing contract for the new 10-gigabyte plan.
- Calculate the amount of recognized revenue for the data plan up to the termination date.
- Reallocate any unrecognized allocated revenue for the data plan to the remaining existing open performance obligation.
- Recognize any remaining unrecognized revenue in the current or future periods only.
- Reallocate unrecognized revenue using the standalone selling price basis as of the contract revision date for new performance obligations and the contract inception date for existing open performance obligations.
- Recognize any remaining unrecognized revenue in the current or future periods only.
To process the immaterial changes successfully for the upgrade, ensure that you include the following attributes with the source document data in the Revenue Basis Data Import template:
| Attribute | Expected Value |
|---|---|
| Quantity | Revised line quantity |
| Unit Selling Price | Unit selling price of revised line |
| Line Amount | Revised line amount |
| Performance Satisfaction Plan End Date | Revised performance plan end date |
| Termination Date | Line termination date |
| Immaterial Change Option | Immaterial |
| Contract Revision Date | Termination date + 1 day |
| Version Line | Y |
| Version Line Number | Greater than earlier version number |
| Attribute | Expected Value |
|---|---|
| Quantity | New line quantity |
| Unit Selling Price | Unit selling price of new line |
| Line Amount | New line amount |
| Performance Satisfaction Plan Start Date | New performance plan start date |
| Performance Satisfaction Plan End Date | New performance plan end date |
| Performance Satisfaction Plan Duration | New performance plan duration |
| Termination Date | Not applicable |
| Immaterial Change Option | Immaterial |
| Contract Revision Date | Date contract is being revised |
| Add to Existing Contract | Y |
| Action code for adding new line to existing contract | CREATE NEW PO |
| Version Line | N |