Types of Accounting Treatments

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Types of Accounting Treatments

Based on the nature of the change that occurs to the revenue contract, such as price, quantity or term, the treatment is derived from the contract modification rules that are configured in RevPro.

The following types of treatment are available when you configure the contract modification rules in RevPro:

  • Retrospective

  • Prospective

  • New Revenue Contract (for new POB only)

  • No Allocation

Retrospective

The increase or decrease of goods or services is combined with the promised goods or services in the original contract to create a single performance obligation that is partially or fully satisfied at the date of the contract modification. The revenue that has been recognized is adjusted to reflect the changes of the modification to the transaction price.

Prospective

The remaining goods or services are distinct from those in the original contract, but the modification does not meet the separate contract criteria (that is, the additional goods or services are not sold at a price that is comparable to their standalone values).

The revenue that has been recognized in the contract is not adjusted. All the remaining transactions are accounted for on a prospective basis and unrecognized consideration is allocated to the remaining performance obligations.

New Revenue Contract

The remaining goods or services are distinct from those in the original contract, but the modification does meet the separate contract criteria (that is, the additional goods or services are sold at a price that is comparable to their standalone values).

No Allocation

No allocation is usually applied to the performance obligation that does not participate in revenue allocation.

 

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