Microsoft's EA includes two distinct true-up mechanisms that many enterprise procurement teams treat as interchangeable. They are not. The annual true-up and the anniversary true-up operate on different timelines, apply different pricing rules, and have different implications for your deployment and renewal strategy. Confusing them — or not knowing which applies to your specific EA — leads to miscalculated liability and misaligned preparation timelines.
This guide provides a precise explanation of how each mechanism works, the key differences between them, and what each means for your compliance programme and renewal planning.
The Annual True-Up: How It Works
The annual true-up is the standard mechanism in most Microsoft Enterprise Agreements. It operates on a 12-month reporting cycle tied to your EA start date (or amendment date, in agreements that have been restructured). Once each year, you report to Microsoft the incremental increase in your licensed product deployment above your current committed quantities.
The core mechanics:
- Measurement point: Your deployment count at a specific date — typically within 30–60 days of your EA anniversary month — not an average over the year.
- Pricing: Incremental licences reported in the annual true-up are priced at the rates locked at EA signing (or at the most recent amendment date). Price lock is one of the EA's primary commercial protections — you pay what you agreed at the start of the term, not the current list price.
- Direction: The annual true-up only captures increases. If your deployment has decreased below your committed quantities, you cannot reduce your base order through the annual true-up. Count reductions are negotiated at EA renewal, not through the true-up mechanism.
- Billing: Any incremental licences reported are billed for the remainder of the current EA term, not the full three years. A licence reported in month 24 of a 36-month EA is billed for 12 months only.
The annual true-up is therefore a compliance reporting mechanism combined with a pro-rata purchase order for any detected licence growth. It is not a wholesale repricing event — your base quantities remain at contracted prices regardless of what happens at true-up. This is a critical distinction when understanding how true-ups work in the broader EA context.
The Anniversary True-Up: How It Differs
The anniversary true-up is a variation that appears in some EA versions and in modified terms negotiated during EA execution. It shares the annual reporting cadence of the annual true-up but operates differently in two key respects: timing precision and pricing treatment.
Annual True-Up
- Reports on deployment increase once per year
- Measured against committed quantity at prior anniversary
- Prices locked at EA start (or last amendment)
- Increments billed pro-rata for remaining term
- Cannot reduce base counts at true-up
- Standard in most current EA agreements
Anniversary True-Up
- Reports on deployment on the specific anniversary date
- Measured against the original committed baseline
- Pricing may reference current EA price list if renegotiated
- Increments may reset baseline for subsequent year
- Some versions allow partial reductions to original baseline
- More common in older EA versions or custom terms
The practical significance of the anniversary true-up's different baseline calculation: under a standard annual true-up, each year's increment is cumulative — your committed quantity grows each year by the amount of the prior year's true-up. Under an anniversary true-up, you are always comparing against the original contracted quantity. In an environment of stable or declining deployment, this can produce different true-up obligations depending on how growth occurred within the year.
The Timing Difference That Matters Most
The most commercially significant difference between the two mechanisms is the measurement point precision. The annual true-up typically allows a 30–60 day window around the anniversary date for the deployment census — giving organisations some flexibility in when the snapshot is taken. The anniversary true-up is, as its name implies, measured on or very close to the anniversary date itself.
This timing precision has a direct impact on your true-up preparation strategy. In an annual true-up environment, you have a window to complete licence recovery actions (deprovisioning inactive accounts, reclassifying users to lower-tier SKUs, removing unused deployments) before the count is taken. In an anniversary true-up environment, that window is narrower — the measurement is tied to a fixed date that cannot be shifted.
If your EA uses anniversary true-up mechanics, your licence governance programme needs to operate on a 10-month cycle, not a 12-month cycle — completing all reconciliation and remediation at least 6–8 weeks before the anniversary date to ensure inactive accounts are deprovisioned before the measurement window opens.
Pricing Rule Differences
Price lock works the same way in both mechanisms for the base EA term: licences you already have committed to are locked at the contracted rate. Where the mechanisms differ is in how incremental licences added through the true-up are priced if Microsoft has updated its price list during the EA term.
Under the standard annual true-up with a price lock clause, incremental licences are priced at the rates in effect at EA signing — even if Microsoft has raised list prices since then. This is one of the most valuable commercial protections in the EA, and is the primary reason that enterprises with growing deployments prefer three-year EAs over more flexible annual subscription models in a rising price environment.
Under some anniversary true-up variants — particularly in agreements that include "then-current pricing" clauses for incremental additions — the price lock does not apply to true-up increments. Licences added through the true-up are priced at Microsoft's current price list at the time of the anniversary, not the original contracted rate. This variation is less common but has significant commercial implications in any product category where Microsoft has raised prices during the EA term — which has been the consistent pattern across M365 and Azure over the past five years.
Review your specific EA amendment language to confirm which pricing rule applies to your true-up increments. This is not a detail — the difference between locked pricing and current-list pricing on a 2,000-seat M365 E5 true-up could be £200,000–£400,000 in a price escalation year.
Determining Which Mechanism Applies to Your EA
Your EA documentation defines which true-up mechanism applies. The relevant clauses are typically found in the EA terms and conditions (the "Agreement") or in the specific enrollment form for your EA. Look for:
- The term "True-Up Order" or "Adjustment Order" and the associated pricing language
- Whether the baseline for increment calculation is the "Initial Order" (original commitment) or the "Prior Year Order" (prior year's committed quantity after any true-ups)
- Whether price lock language explicitly covers true-up increments or only the "Initial Order" quantities
If your EA dates from before 2015, you are more likely to be on an anniversary true-up structure. EAs signed or renewed after 2016 predominantly use the annual true-up with cumulative baseline increments. Agreements modified through COVID-era flexibility programmes introduced some non-standard variations that may differ from either standard mechanism.
When in doubt, have an independent adviser read your specific EA terms. The commercial stakes of misidentifying your true-up mechanism are material — it affects both your compliance preparation timeline and your pricing exposure for any incremental licences required.
The Three-Year True-Up Alternative
Some enterprises — particularly those in stable environments with well-understood deployment patterns — negotiate what is effectively a three-year true-up: no annual reporting obligation, with a single reconciliation at the end of the EA term. This is less common and typically requires Microsoft's agreement, but it offers a dramatically simplified compliance burden.
The commercial trade-off: deferring true-up to year three means any under-licensing discovered at term end is charged at the then-current rate for the full three-year period — retroactively. In a rising price environment, this is a significant risk. The three-year model works well only for organisations with consistently declining or stable deployment profiles where the probability of under-licensing is genuinely low.
The Connection to EA Renewal
Both annual and anniversary true-up data feeds directly into your renewal negotiation starting position. Your cumulative true-up history — how much your deployment has grown, which products have grown, which have stagnated — is the baseline Microsoft uses to anchor their renewal proposal. Understanding your true-up mechanism helps you understand exactly what data Microsoft is using as that anchor.
For a comprehensive guide to the full true-up and compliance framework within the EA context, our enterprise compliance guide covers the complete picture. For the specific mechanics of what makes an effective true-up submission, preparing for your true-up in 2026 provides a step-by-step preparation timeline. And for understanding how the true-up data can be converted into commercial leverage at renewal, see our guide to using true-up history as a negotiation asset.