Modifying a contract? Your revenue recognition may change

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We continue our revenue podcast miniseries discussing contract modifications. Contract modifications are accounted for as either a separate contract or as part of the existing contract, depending on the nature of the modification.

In this episode, we discuss: 

• 4:47 – An overview of contract modifications   
• 5:57 – Modifications that are accounted for as separate contracts 
• 6:54 – Modifications that are accounted for prospectively 
• 10:08 – Modifications that result in cumulative catch-up adjustments 
• 11:28 – Other types of modifications 
• 13:16 – Common contract modification scenarios and related accounting pitfalls 
• 23:22 – Contract terminations 

For more information, see section 2.9 of our Revenue guide. Also, check out other episodes in our miniseries: Gross versus net revenue: Is your company the principal or agent? and Identifying the contract – The first step in recognizing revenue. Additionally, follow this podcast on your favorite podcast app for more episodes.   

Pat Durbin is a Deputy Chief Accountant in PwC’s National Office. He has over 30 years of experience consulting with our clients and engagement teams on complex accounting matters, including issues related to revenue, compensation, income taxes, and inventory under both US GAAP and IFRS.

Angela Fergason is a partner and standard setting leader in PwC's National Office who specializes in accounting for revenue and employee compensation arrangements. She also consults on a range of financial reporting issues impacting technology companies.

Heather Horn is the PwC National Office Sustainability & Thought Leader, responsible for developing our communications strategy and conveying firm positions on accounting, financial reporting, and sustainability matters. In addition, she is part of PwC’s global sustainability leadership team, developing interpretive guidance and consulting with companies as they transition from voluntary to mandatory sustainability reporting. She is also the engaging host of PwC’s quarterly webcast series.

Transcripts available upon request for individuals who may need a disability-related accommodation. Please send requests to [email protected].