Overview

Rip and Replace enables you to replace one or more existing contracts with a new contract while ensuring that contractual balances and revenue recognition continue correctly.

Organizations frequently renegotiate commercial agreements with their customers. Rather than maintaining multiple active contracts, they may create a new consolidated contract that replaces one or more existing contracts. The new contract becomes the governing commercial agreement and supersedes all previous contractual arrangements.

A "Rip and Replace" is a commercial maneuver in which an organization terminates an existing contract (the "ripped" contract) and simultaneously executes a new agreement (the "replacement" contract) with the same customer. The new deal resets terms, pricing, or product deliverables instead of amending the original contract in place.

Teams typically use rip and replace to:

• Lock in upsells or expanded scope under fresh commercial terms.

• Process early renewals before the original term ends.

• Navigate structural subscription changes—such as combining multiple purchases under one contract or co-terming lines to a single end date.

The ultimate goal is to retire the outdated agreement on the books and recognize revenue on the new, agreed-upon parameters, while treating prior recognition and remaining obligations correctly.

For details about choosing the correct accounting treatment, see Choose the correct Rip and Replace scenario.