Example of an Immaterial Change Due to Termination
This example illustrates how to populate the immaterial change-related attributes to terminate a performance obligation line in an existing contract.
The customer has purchased a phone, a two-year voice plan, and a two-year data service plan. With this offer, the customer receives the phone at a discount. This order translates into an initial accounting contract that consists of three performance obligations:
- Phone
- Voice plan
- Data plan
After one year, the customer decides to terminate the data plan. The termination is to be accounted using prospective accounting. The immaterial change functionality applies prospective accounting treatment by:
- Calculating the amount of recognized revenue for the data plan up to the termination date.
- Reallocating any unrecognized allocated revenue for the data plan to the remaining existing open performance obligation.
- Recognizing any remaining unrecognized revenue in the current or future periods only.
To process the immaterial change successfully, ensure that you include the following attributes with the source document line 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 the earlier version number |