Example of Prospective Accounting for Point-in-Time Immaterial Price Changes
This example shows a customer contract with three performance obligations.
Two of the performance obligations have a satisfaction measurement model of Measure Quantity Satisfied and one has a satisfaction measurement model of Measure Period Satisfied.
This table shows key values you entered in the initial customer contract, along with the allocated amount and recognized amount:
| Item Number | Quantity | Unit Selling Price | Line Amount | Promised Detail Amount | Revenue Recognized to Current Period | Unit SSP | Extended SSP | Plan Start Date | Plan End Date | Measurement Model | Version Line | Version Number |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Service A | 6 | 165.00 | 990.00 | 1005.37 | 167.56 | 300.00 | 1800.00 | 01-Feb-24 | 31-Jul-24 | Period | N | 1 |
| Item 1 | 10 | 500.00 | 500.00 | 4580.00 | 0.00 | 820.00 | 8200.00 | Quantity | N | 1 | ||
| Item 2 | 15 | 135.00 | 2025.00 | 2429.63 | 0.00 | 290.00 | 4350.00 | Quantity | N | 1 | ||
| Total | 8015.00 | 8015.00 |
There's a change in the unit selling price of item 1 from 500 USD to 525 USD, with a contract revision date of 16-Feb-2024. You import the contract modification with an immaterial change type of Immaterial. The Identify Customer Contracts process triggers prospective accounting.
This table shows the contract after prospective accounting:
| Item Number | Quantity | Unit Selling Price | Line Amount | Promised Detail Amount | Revenue Recognized to Current Period | Unit SSP | Extended SSP | Plan Start Date | Plan End Date | Measurement Model | Version Line | Version Number |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Service A | 6 | 165.00 | 990.00 | 1034.34 | 170.11 | 300.00 | 1800.00 | 01-Feb-24 | 31-Jul-24 | Period | N | 1 |
| Item 1 | 10 | 525.00 | 5250.00 | 4724.42 | 0.00 | 820.00 | 8200.00 | Quantity | Y | 2 | ||
| Item 2 | 15 | 135.00 | 2025.00 | 2506.25 | 0.00 | 290.00 | 4350.00 | Quantity | N | 1 | ||
| Total | 8265.00 | 8265.00 |
This table shows the immaterial price revision details:
| Contract Revision Date | Quantity | Service duration | Entered Unit Selling Price | Selling Amount | Plan Start Date | Plan End Date | Unit SSP | Extended SSP | Allocated Amount |
|---|---|---|---|---|---|---|---|---|---|
| 15-Feb-24 | 6 | 165.00 | 990.00 | 01-Feb-24 | 31-Jul-24 | 300.00 | 1800.00 | 1005.37 | |
| 16-Feb-24 | 0.517 | 1 | 165.00 | 85.34 | 01-Feb-24 | 15 Feb-24 | 300.00 | 155.17 | 86.67 |
| 16-Feb-24 | 5.483 | 165.00 | 904.66 | 16-Feb-24 | 31-Jul-24 | 300.00 | 1644.83 | 947.67 |
Notice that the revenue recognized until 15-Feb-2024 (the day before the contract revision date) is intact while the reallocation of the new transaction price takes place from the contract revision date. The details of the allocation before and after the contract revision date are displayed in the Immaterial Revision Details subtab in the Edit Customer Contract page.
This table shows the allocated amounts of each obligation when the contract modification triggers retrospective accounting:
| Item | Quantity | Unit Selling Price | Line Amount | Unit SSP | Extended SSP | Plan Start Date | Plan End Date | Allocated Amount |
|---|---|---|---|---|---|---|---|---|
| Service A | 6 | 165.00 | 990.00 | 300.00 | 1800.00 | 01-Feb-2024 | 31-Jul-24 | 1036.72 |
| Item 1 | 10 | 525.00 | 5250.00 | 820.00 | 8200.00 | 4722.86 | ||
| Item 2 | 15 | 135.00 | 2025.00 | 290.00 | 4350.00 | 2505.42 | ||
| Total | 8265.00 | 8265.00 |