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
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |
