Terminal-period remainder absorption
Terminal-period remainder absorption is a rounding policy for revenue schedules: compute each period's amount from the allocated price, round to the cent, and let the final period absorb the difference between the allocated amount and the sum of earlier periods. The schedule then sums exactly to the allocation, and deferred revenue ends at zero.
Standard references
- PolicyNot prescribed by ASC 606, IFRS 15 or Ind AS 115 (the standards do not set rounding rules; this is an accounting policy that keeps the schedule equal to the allocated amount)
Worked example
Illustrative: $100,000 allocated to a 36-month subscription.
- Exact monthly amount: $2,777.777…
- Round each month up to $2,777.78: total $100,000.08, eight cents too much.
- Truncate each month to $2,777.77: total $99,999.72, leaving $0.28 deferred forever.
- Absorb in the final period: 35 × $2,777.77 = $97,221.95; month 36 = $2,778.05; total $100,000.00.
Result: The schedule ties to the cent and deferred revenue closes at $0.00.
Illustrative figures for explanation only, not taken from a real contract.
Common mistakes
- Rounding every period independently and leaving the residue in deferred revenue.
- Spreading the remainder ad hoc instead of under a written rule.
- Using one rounding rule for allocations and a different one for schedules without documenting either.
How Soluqube handles this
Soluqube's engine uses this rule: integer (BigInt) arithmetic at 10^6 scale, rounded to cents, with the final period absorbing the remainder.