RevRec recipes / New performance obligation at SSP
A customer already under contract buys something new mid-term, priced at its standalone selling price. Here's how Chargebee RevRec handles it.
The problem
When the new item is distinct and priced at its standalone selling price, ASC 606-10-25-12 (and IFRS 15.20) requires an entity to account for the change as a separate contract rather than a modification of the one already in place.
What that means
Every obligation already on it keeps the amount it was allocated at signing.
its own allocation, and its own recognition schedule, independent of everything that came before it.
The example
Northwind Labs signs a one-year contract with Relay CRM on 1 January 2027: 90 seats of the core CRM plus a flat premium support fee. Six months in, on 1 July, they purchase the AI Suite add-on at its list price. Every number on this page comes from the order form below.
| Line | Product | Qty | Rate | Service window | Annual fee |
|---|---|---|---|---|---|
| IM-101 | Core CRM (per seat) | 90 | $79 / mo | 1 Jan – 31 Dec 2027 | $85,320.00 |
| IM-102 | Premium Support (flat) | 1 | $1,000 / mo | 1 Jan – 31 Dec 2027 | $12,000.00 |
| Original contract value | $97,320.00 | ||||
| Line | Product | Qty | Rate | Service window | Fee |
|---|---|---|---|---|---|
| IM-103 | AI Suite add-on | 1 | $1,667 / mo | 1 Jul – 31 Dec 2027 | $10,000.00 |
| Grand total consideration | $107,320.00 | ||||
Term & cancellation. Non-cancellable for the initial term. The mid-term purchase does not change the December 31 end date of the original lines.
Technically, any change to a live contract is a modification, and AI Suite's purchase on 1 July is one. But a modification that clears both tests, distinct and at SSP, is accounted for exactly like a new contract sold to an existing customer: the original $97,320 arrangement isn't reopened at all.
| Original contract value in scope | $97,320.00 |
| Modification date | 1 Jul 2027 |
| Modification type | Separate contract |
Core CRM and Premium Support are unchanged from January, both recognized ratably over the year. AI Suite is recognized ratably too, but over its own six-month window rather than blended into the other two.
AI Suite's separate contract carries a fixed $10,000 for the six months from July to December. There's no usage component, rebate, or milestone to estimate or constrain.
| Original contract transaction price | $97,320.00 |
| Separate contract (AI Suite) | $10,000.00 |
| Total consideration across both | $107,320.00 |
Here's how the $107,320 splits by obligation.
| A | B | C | |
| 1 | Obligation | SSP basis | Allocated |
|---|---|---|---|
| 2 | Core CRM | $85,320.00 | $85,320.00 |
| 3 | Premium Support | $12,000.00 | $12,000.00 |
| 4 | AI Suite (separate contract) | $10,000.00 | $10,000.00 |
| 5 | Total | $107,320.00 | $107,320.00 |
No order-level discount here, so each obligation's allocated amount equals its price.
Suppose Northwind had negotiated AI Suite down 25%, to $7,500 for the six months. That's below its $10,000 SSP for the window, so it fails the SSP test, and the July purchase becomes a modification of the original contract instead of a separate one. The standard's prospective method then runs in three moves.
| A | B | C | D | |
| 1 | Line | Prior allocation | Fraction earned | Frozen |
|---|---|---|---|---|
| 2 | Core CRM | 85,320.00 | 181 / 365 | 42,309.37 |
| 3 | Premium Support | 12,000.00 | 181 / 365 | 5,950.68 |
| 4 | Frozen through 30 Jun | 48,260.05 |
| A | B | C | |
| 1 | Line | Remaining SSP | Post-mod allocated |
|---|---|---|---|
| 2 | Core CRM | 43,010.63 | 41,132.75 |
| 3 | Premium Support | 6,049.32 | 5,785.20 |
| 4 | AI Suite | 10,082.19 | 9,642.00 |
| 5 | Remaining pool | 56,559.95 |
Premium Support is the one to watch. Nobody renegotiated it, yet its full-year revenue moves from $12,000 to $11,735.88 (5,950.68 frozen + 5,785.20 after), since the new discount spreads over the remaining term and pulls a little off every line. That's the difference the SSP test decides.
All three obligations are recognized ratably, so revenue is daily. Core CRM and Premium Support run at a combined $266.63 per day across all 365 days. AI Suite runs at $54.35 per day across its own 184-day window from 1 July.
Bar heights vary slightly by month because recognition is daily: a 31-day month earns more than a 30-day month.
Every column below sums to its Step 4 allocation, and the grand total ties to the $107,320 transaction price.
| A | B | C | D | E | |
| 1 | Period | Core CRM | Premium Support | AI Suite | Total recognized |
|---|---|---|---|---|---|
| 2 | 2027-01 | 7,246.36 | 1,019.18 | 0.00 | 8,265.54 |
| 3 | 2027-02 | 6,545.10 | 920.55 | 0.00 | 7,465.65 |
| 4 | 2027-03 | 7,246.36 | 1,019.18 | 0.00 | 8,265.54 |
| 5 | 2027-04 | 7,012.60 | 986.30 | 0.00 | 7,998.90 |
| 6 | 2027-05 | 7,246.36 | 1,019.18 | 0.00 | 8,265.54 |
| 7 | 2027-06 | 7,012.60 | 986.30 | 0.00 | 7,998.90 |
| 8 | 2027-07 | 7,246.36 | 1,019.18 | 1,684.78 | 9,950.32 |
| 9 | 2027-08 | 7,246.36 | 1,019.18 | 1,684.78 | 9,950.32 |
| 10 | 2027-09 | 7,012.60 | 986.30 | 1,630.43 | 9,629.33 |
| 11 | 2027-10 | 7,246.36 | 1,019.18 | 1,684.78 | 9,950.32 |
| 12 | 2027-11 | 7,012.60 | 986.30 | 1,630.43 | 9,629.33 |
| 13 | 2027-12 | 7,246.34 | 1,019.17 | 1,684.80 | 9,950.31 |
| 14 | Full year | 85,320.00 | 12,000.00 | 10,000.00 | 107,320.00 |
AI Suite is invoiced in full, $10,000, the moment it's purchased in July, but earned only over the six months it covers. The gap sits as deferred revenue and unwinds to zero by December.
| A | B | C | D | E | |
| 1 | Period | Billed | Earned | Opening Deferred Revenue | Closing Deferred Revenue |
|---|---|---|---|---|---|
| 2 | 2027-07 | 10,000.00 | 1,684.78 | 0.00 | 8,315.22 |
| 3 | 2027-08 | 0.00 | 1,684.78 | 8,315.22 | 6,630.44 |
| 4 | 2027-09 | 0.00 | 1,630.43 | 6,630.44 | 5,000.01 |
| 5 | 2027-10 | 0.00 | 1,684.78 | 5,000.01 | 3,315.23 |
| 6 | 2027-11 | 0.00 | 1,630.43 | 3,315.23 | 1,684.80 |
| 7 | 2027-12 | 0.00 | 1,684.80 | 1,684.80 | 0.00 |
Disclaimer This page is not accounting advice.
Chargebee RevRec runs the SSP test on every mid-term purchase, keeps separate contracts separate, and reallocates only when the rules require it, with every number traceable back to the order form.
