In the fourth quarter of 2022 Avid Technology (AVID), a maker of video editing software, adjusted its subscription revenue higher by $2 million after discovering what it calls an error in its standalone selling prices (SSP) in prior years. While acknowledging a related control deficiency, Avid offered the following detail in its latest annual report:

“Our mix of subscription contracts shifted in 2021, and continued to shift in 2022, towards enterprise customers, but we did not adjust the SSP estimation methodology used to determine the allocation of the transaction price arrangements between the license and maintenance. This caused a material weakness in the controls related to the estimation methodology used to account for revenue at December 31, 2022, which we identified during the close process in the fourth quarter of 2022.”

The timing of the discovery is notable.

In November, Avid lowered its full year 2022 guidance. Specifically, the company cut the low end of its Subscription & Maintenance revenue forecast to $260 million.

When it released full year results in March 2023, Avid barely met its own lowered forecast, reporting $261.1 million in Subscription & Maintenance revenue.

Without the new SSP estimate, Avid would have missed the guidance it had just provided four months earlier.

In disclosing the related control deficiency that led to the error, Avid assured investors there were no material misstatements in any prior period financial statements.