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A customer leaves early and the commission is recovered. Whether that lands in the current period or against the capitalised balance changes both numbers.
A $36,000 commission is capitalised over a 48 month benefit period, at $750 a month. In month twenty, the customer terminates.
Commission paid $36,000
Recognised through month 20 $15,000
Capitalised balance written off $21,000
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Ties to commission paid $36,000
Two things happen at once and they are frequently confused. The capitalised asset has to come off the books, because the thing it related to has ended. Separately, you may be recovering cash from the rep under a clawback clause.
Those are different events with different amounts and different timing, and treating them as one is the most common error in this area.
Because in a spreadsheet they usually arrive as one line. Somebody is told the customer churned and the rep owes $12,000 back, and the natural move is to net that against this month's commission expense and move on.
Do that and two things go wrong. The capitalised balance of $21,000 is still sitting there, relating to a contract that no longer exists. And the current period's commission expense now contains a recovery relating to a deal from twenty months ago, which makes the period look better than it was.
The balance sheet keeps an asset it should not have. The income statement carries a credit that does not belong to it. Both errors are invisible unless somebody reconciles the deferred commission balance to the underlying contracts, which is exactly the reconciliation nobody runs.
The write-off. The remaining capitalised balance relates to a benefit period that has ended. It comes off, in the period the termination happened, as its own movement. In the example, $21,000.
The recovery. If the commission agreement gives you a clawback, the amount is whatever the agreement says, which is usually a proration and rarely equals the unamortised balance. It might be $12,000, or $18,000, or nothing if the clawback window has passed. It is a receivable from the rep, and it is not the same number as the write-off.
The two are related only in that the same event triggered both. Sizing one from the other is how they end up wrong.
Opening capitalised balance
Additions new commissions capitalised
Amortisation normal expense for the period
Write-offs terminated contracts
Closing capitalised balance
Four movements, each attributable to specific contracts. A clawback receivable does not appear in this statement at all, because it is not a movement in the commission asset. It is a separate item, and keeping it separate is what makes both explainable.
If your current rollforward has three movements because amortisation and write-offs are combined, that is where to start. The combined figure is right in total and useless for answering why it moved.
Write-offs get netted into amortisation. The month's total is correct and the composition is lost.
Partial terminations. A customer reduces scope rather than leaving. Part of the balance should come off, and the remainder should continue amortising, possibly over a revised period. A formula written for full termination handles this by somebody editing cells.
Reinstatement. A termination is reversed, or the customer returns within the window. The write-off needs undoing, and a workbook has no concept of undoing an event.
Timing. The termination is known in March, processed in April, and the clawback is recovered in June. Three periods, three different amounts, and each has to land in the right one.
This is the same structure as a forfeited equity grant and the same as a lease modification. An event happens, it is recorded in the period it happened, with its own movement type, attributable to the thing it relates to. Prior periods are not touched.
Every one of these modules has a version of that rule, and every failure mode is a version of ignoring it: netting a movement into another movement, or reaching back to rewrite what was already reported.
Not sure where your process sits?
The payment is a cash event. The benefit period decides when it becomes expense.