ADR 0005 — Recognition, close, modification & credit defaults

Date: 2026-07-30
Status: Accepted
Deciders: RevRec Next design session (grill lock)

Context

Open product forks blocked a coherent engine: calendar grain, cancel, CN overflow, locked-period corrections, prospective vs cumulative mods. Enterprise Zuora-class scope needs explicit defaults; policies remain configurable.

Decision

Recognition calendar

• Schedule grain: store daily schedule lines (or equivalent day-weighted lines) as the precise model.
• Recognize API: recognize(period) aggregates open lines whose period falls in the accounting period (monthly fiscal periods by default).
• Proration policies (30/360, true days, inclusive start/end) are named config — not hardcoded branches.

Rationale: daily precision supports mid-period amendments and smoke true30/360 themes without locking UI to daily close.

Period state machine

OPEN → RECOGNIZING → RECOGNIZED → POSTING → POSTED → SOFT_CLOSED → HARD_LOCKED

• Soft close: block new recognition into period; allow controlled reopen.
• Hard lock: mutations require PPA / next-period catch-up policy — never silent rewrite.
• RevRec period close precedes AC close for revenue/tax event types (see ADR 0006 / AC PRD).

Modifications

• Amendments are first-class (amend_contract) with explicit treatment:
• Default: prospective reallocation of remaining distinct PO consideration (ASC 606-10-25-13(a)).
• Supported: cumulative catch-up when remaining goods/services are not distinct (ASC 606-10-25-13(b)).
• Supported: account as separate contract when distinct + standalone price (ASC 606-10-25-12).
• Policy ids: mod.prospective, mod.cumulative, mod.separate_contract.

Termination (term.cancel)

• Default: prospectively zero remaining open schedule (release obligation); do not auto-recognize remaining into P&L unless policy term.cancel.recognize_remaining is set.
• Termination fees / penalties are separate TP/PO or billing events when present in source.

Credit notes

• Map reason_code → policy id.
• Default cn.refund_unrecog: reduce unrecognized/deferred/remaining schedule first.
• Overflow (CN > unrecognized): cn.overflow.reverse_recog — reverse recognized revenue to the extent needed (explicit, auditable), not silent AR-only unless cn.ar_only.

Locked-period facts

• Default: book as prior-period adjustment in the next open period with full audit (ppa.*), unless reopen is explicitly performed.

Contract asset / unbilled

• First-class balances: when recognition precedes billing, record contract asset / unbilled receivable (ASC 606-10-45); when billing precedes recognition, contract liability / deferred.

Consequences

Engine scenarios S01–S05+ and smoke quarry themes (modification, credit-note, ppa, deferred-revenue, recognition-plan) map to these named policies. Merchants can override via config; defaults are enterprise-sane.