1 min lesson
Modifications, upgrades and co-terming
Use "Modifications, upgrades and co-terming" to tell the cases apart, then choose a response for each one.
Step 1 of 2
Modifications, upgrades and co-termingcontracts rarely sit still
Mid-term changes are the part candidates fumble. The treatment depends on whether the change adds distinct goods or services at their SSP or alters the existing arrangement.
Adds distinct obligations priced at SSP.
Treated as a brand-new contract.
No retrospective effect on the original.
Remaining goods are distinct, but not at SSP.
Blend unrecognized amount with new consideration.
Recognize over the remaining term going forward.
Remaining goods are not distinct from delivered ones.
Re-measure the single obligation.
Book a true-up in the current period.
Co-terming, where a mid-year upsell is aligned to expire with the original contract, usually falls into the prospective bucket: you reset the schedule for the combined remaining term. Get the classification wrong and the timing of recognized revenue is wrong, which is exactly the kind of error an auditor catches.