The formulas
- Unrecognized = original price x remaining units / original units
- Per-unit revenue = (unrecognized + added price) / (remaining + added units)
How it works
When a modification adds distinct goods at a price that does not reflect standalone selling price, and the remaining goods are distinct from those already transferred, ASC 606-10-25-13(a) treats it as termination of the existing contract and creation of a new one. The unrecognized consideration plus the new consideration is spread over all remaining goods.
The example uses ASC 606-10-55-111 to 55-116 Case B: 60 of 120 products at $100 remain and 30 more are added at a negotiated $80 that is not standalone selling price, so each remaining product earns $93.33. (The $900 credit for defective units in that example reduces revenue on the units already delivered and stays out of this calculation.)
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
When is a modification a separate contract?
When scope increases for distinct goods priced at standalone selling price (ASC 606-10-25-12). Then the original contract is left alone.
What if the remaining goods are not distinct?
ASC 606-10-25-13(b) applies: a cumulative catch-up as part of the existing contract.
Does past revenue change?
No. Prospective treatment leaves revenue already recognized untouched.
Sources
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