IFRS 15 Revenue – Variable Consideration

Hi,

Hope you are doing well.

I need some clarification on variable consideration when determining the transaction price and would kindly like you to help me.

The standard states:

“An entity shall include in the transaction price some or all of an amount of variable consideration only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.”

Can you please explain in simple terms what is meant by “a significant reversal in the amount of cumulative revenue recognized”?

I’d appreciate it if you provide an example as well.

Thanks