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Chapter 4

Variable consideration

IFRS 15 says that if a contract includes variable consideration (e.g. a bonus or a
penalty) then the entity must estimate the amount it expects to receive.

This estimate of variable consideration will only be included in the transaction price if
it is highly probable that a significant reversal in the amount of revenue
recognised will not occur when the uncertainty is resolved.

Financing

If there is a significant financing component, such as when the customer pays more
than a year after receiving the goods or services, then the consideration receivable
needs to be discounted to present value using the rate at which the customer
borrows money.

Non-cash consideration

Any non-cash consideration is measured at fair value.

Consideration payable to a customer

If consideration is paid to a customer in exchange for a distinct good or service, then
it should be accounted for as a separate purchase transaction.

Assuming that the consideration paid to a customer is not in exchange for a distinct
good or service, an entity should account for it as a reduction in the transaction price.

Illustrations and further practice

Now try TYUs 1 – 4 from Chapter 4.

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