Page 173 - F2 Integrated Workbook STUDENT 2019

Revenue from contracts with customers

Variable consideration

A sale may include an element of its consideration that contains uncertainty
regarding its occurrence or value.

Examples include:

 Penalties incurred by customers for failure to comply with terms and conditions
e.g. charges for failing to meet repayment terms

 Bonuses to the seller for meeting deadlines or performance targets e.g. bonus
is paid if job is completed on time

IFRS 15 says that if a contract includes variable consideration the entity must
estimate the amount it expects to receive.

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.

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