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Dear Sir,
According to the explanation of the past examination of December 2019, Question 3:
“The fair value of non-cash consideration may vary. If the non-cash consideration varies for reasons other than the form of the consideration, entities will apply the guidance in IFRS 15 related to constraining variable consideration. However, if fair value varies only due to the form, the variable constraint guidance in IFRS 15 would not apply. In this case, the fair
value varies due to the form of the consideration which is equity shares and therefore the variable constraint guidance in IFRS 15 does not apply.”Can you further explain what is constraining variable consideration and give the example?
You can recognise variable consideration if there is no constraint on recognising it.
Translate – approximately – don’t book variable consideration unless you are pretty sure that you are going to get it
Example
I am building a motorway for a customer and want to bill him for some extra costs which were not forseen when the contract was entered into
I am pretty sure that I can recover those costs from the customer, then I can book the revenue
That’s my best effort!
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