Contract Modifications

Question 1

When a contract is modified, it will result in either:

Answer 1

1) A new separate contract

2) A modification to the existing contract

Question 2

How do you know if you have a new separate contract?

Answer 2

Additional goods or services are distinct

Consideration for additional goods reflects proper stand alone pricing

Question 3

How do you know if you have a modification to existing contract?

Answer 3

Additional goods or searches are not distinct OR pricing is not a proper stand alone prices

Use the prospective approach (use a blended price for additional goods or services)

Question 4

How you incur costs to fulfill a contract, how do you account for those?

Answer 4

Expense as incurred if less than one year

If the expense is greater than one year and it is incremental cost