Overview:
When the agreement terms change after transition or commencement, it constitutes a modification under GASB 87, GASB 96, ASC 842 and IFRS 16. In Cradle, you should use the 'Modification’ Tab to record these changes.
Here is a 1-minute video to explain how to add modifications in Cradle:
Video Length: 1 minute
Alternatively, here are the steps to add modifications:
Step 1: To capture the change to the agreement terms in Cradle, navigate to the applicable agreement and click Modifications.
Step 2: Then click + Add New Modification
From here, click on the input you want to update. The most common are:
Accounting End Date: This will change the end date of the agreement.
Fixed Payment: This will change the fixed payment amount
The key inputs of adding a modification are the date effective and the start date. For more information on that, refer here: http://appsupport.cradleaccounting.com/en/articles/6514100-what-is-the-date-effective.
FAQs:
Should I change the agreement terms in the initial recognition? No, you should not. After establishing the initial recognition, the original terms should remain unchanged unless there was an error in the initial setup. Any subsequent changes to the agreement terms should be recorded as modifications.
Further Reading: