Contract modification clause samples

b) An entity shall account for the contract modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. The effect that the contract modification has on the transaction price, and on the entity’s measure of progress toward complete satisfaction of the performance obligation, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification (that is, the adjustment to revenue is made on a cumulative catch-up basis).

The Company determined that the contract modification did not add any new services to the performance obligation to develop the AirToken Project. Therefore, an in accordance with ASC 606-10-25-13 (b), the Company will account for the contract modification as if it were a part of the existing contract that is partially satisfied at the date of the contract modification. The effect that the contract modification has on the transaction price, and on the Company’s measure of progress toward complete satisfaction of the performance obligation, will be recognized as an adjustment to revenue at the date of the contract modification (that is, the adjustment to revenue is made on a cumulative catch-up basis) which is deemed to have occurred in the quarter ended December 2017.

2. Refer to your response to prior comment 5. You state that, under ASC 606, you attribute a cancellation notice from the customer as a contract modification. Please clarify for us why you believe that a contract cancellation according to terms in the original agreement can be analogized to a modification for accounting purposes rather than be accounted for as a variable consideration under ASC 606-10-32. Please also provide proposed disclosure to be included in future filings describing your accounting policy for contract cancellations.

·Determine whether a change to a contract qualifies as a contract modification. ·Determine whether the modification should be treated as a separate, standalone contract or as a modification of the original contract. If the contract is a separate contract, the entity follows the five-step model to determine how to recognize revenue. If the modification is not treated as a separate contract, the entity continues to Step 3. ·Determine appropriate accounting treatment for contract modification not accounted for as a separate contract.