CAC Contract Cost — Monthly Amortization
Amortizing the capitalized customer acquisition cost over the contract period.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Commission Expense (Amortized) | Expense (+) | 1.46 | - |
| Contract Costs — CAC Asset | Asset (-) | - | 1.46 |
💡 Accountant's Note
JOD 35 capitalized CAC over 24 months amortizes at JOD 1.46/month. This prevents the full subscriber acquisition cost hitting in month 1 of a 2-year contract, improving reported EBITDA margin.
Practitioner & Systems Framework
💻 ERP Architecture
CAC amortisation is calculated by the contract cost module for each subscriber cohort (grouped by activation month and plan type). The monthly amortisation rate is contract cost / remaining contract months. Amortisation is posted automatically to the commission expense account and reduces the contract cost asset. When a subscriber churns, the remaining unamortised contract cost is immediately expensed. The contract cost asset and its movement (additions, amortisation, early termination write-offs) are disclosed in the financial statements.
⚠️ Audit Flags
Auditors reconcile the contract cost asset roll-forward (opening balance + additions - amortisation - early termination write-offs = closing balance). Test that the early termination write-off is triggered promptly on subscriber churn. Review the portfolio-level recoverability test — declining ARPU trends may indicate that the total contract cost asset exceeds the recoverable amount. Confirm that the amortisation period is updated if the subscriber upgrades or extends their contract.
📄 Required Documentation
Contract cost asset roll-forward schedule (by cohort), monthly amortisation journal, early termination write-off records (linked to churn data), recoverability assessment, ARPU trend analysis, and financial statement note on contract cost assets.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.