Cumulative catch-up
A cumulative catch-up adjustment recognises, in the current period, the effect of a change on revenue recognised to date, as if the revised terms or estimates had applied from inception. It applies to modifications of a single, partially satisfied performance obligation and to changes in estimated progress or transaction price.
Standard references
- ASC 606606-10-25-13(b)
- ASC 606606-10-32-43 (changes in transaction price)
- IFRS 15paragraph 21(b)
Worked example
Illustrative: a $100,000 fixed-fee build is 40% complete, so $40,000 has been recognised. A modification adds $20,000 of scope that is not distinct from the build, and revised total costs put progress at 35%.
- New transaction price: $100,000 + $20,000 = $120,000.
- Cumulative revenue that should have been recognised: $120,000 × 35% = $42,000.
- Catch-up in the period of modification: $42,000 − $40,000 = $2,000.
Result: $2,000 of revenue in the current period; prior periods are not restated.
Illustrative figures for explanation only, not taken from a real contract.
Common mistakes
- Restating prior periods instead of recording the adjustment in the current period.
- Applying a catch-up to services that are distinct from those already transferred.
- Not disclosing significant changes in estimates.
How Soluqube handles this
Soluqube does not automate modification catch-up today; it is on the roadmap.