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Variable consideration

Estimate variable consideration using the expected-value or most-likely-amount method, whichever better predicts the amount. Include it in the transaction price only to the extent that it is highly probable that a significant reversal of cumulative revenue will not occur when uncertainty is resolved. Reassess estimates at each reporting date; apply the specific sales- or usage-based royalty exception where relevant.

Worked example

A supplier earns fixed consideration of $100,000 plus a performance bonus ranging from zero to $10,000. Using the method that best predicts the bonus, it estimates $4,000. If including that amount is highly probable not to cause a significant reversal of cumulative revenue when the uncertainty is resolved, the transaction price is $104,000 before other adjustments.

Common mistake

Recognising the maximum possible bonus immediately or interpreting the constraint as requiring absolute certainty.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA FR Direct September 2026–June 2027
ACCA SBR Direct September 2026–June 2027