In the context of IFRS15 / US GAAP, Variable consideration shall beincluded in transaction price only to extend that it is not constrained i.e highly probably that its inclusion will not result in a significant revenue reversal in future when any uncertainty has been subsequently resolved.
There are 2 methods of estimating the amount of variable consideration
Expected value method – where the sum of probability-weighted amounts in a range of possible consideration amounts is considered as the amount of variable consideration to be included in the transaction price. This method is more appropriate if an entity has a large number of contracts with similar characteristics
2. Most likely amount method – wher the single most likely amount in a range of possible consideration amounts is considered as the amount of variable consideration to be included in the transaction price. This method is more appropriate if the contract has only 2 possible outcomes.
Now in the first situation, since Thomas consultants use the expected value method and estimates that there is a 55% chance that it will achive the said result. So the amount of variable consideration to be included in the transaction price shall be 13,500 (55% x 30,000) and the transaction price shall be 73,500 (60,000 + 13,500)
In the second situation, using the most likely outcome method, since Thomas consultants estimate that it is more likely to achieve the said cost-saving target meaning the most likely outcome is Yes. So the amount of variable consideration to be included in the transaction price shall be 30,000 in full and the total transaction price shall be 90,000 (60,000 + 30,000)
Note: Due to the absence of furthur information, it is assumed that the said variable consideration of 30,000 will not result in a significant revenue reversal when the said tax-saving have been achieved by Thomas Consultants.
А B с D E Thomas Consultants provided Bran Construction with assistance in implementing various cost-savings...
Thomas Consultants provided Bran Construction with assistance in implementing various cost-savings initiatives. Thomas� contract specifies that it will receive a flat fee of $50,000 and an additional $20,000 if Bran reaches a prespecified target amount of cost savings. Thomas estimates that there is a 20% chance that Bran will achieve the cost-savings target. Required: 1. Assuming Thomas uses the expected value as its estimate of variable consideration, calculate the transaction price. 2. Assuming Thomas uses the most likely value as...
Thomas Consultants provided Bran Construction with assistance in implementing various cost-savings initiatives. Thomas’s contract specifies that it will receive a flat fee of $50,000 and an additional $20,000 if Bran reaches a prespecified target amount of cost savings. Thomas estimates that there is a 20% chance that Bran will achieve the cost-savings target. Required: 1. Assuming Thomas uses the expected value as its estimate of variable consideration, calculate the transaction price. 2. Assuming Thomas uses the most likely value as...
Exercise 6-9 (Algo) Variable consideration; estimation and constraint (LO6-6) Thomas Consultants provided Bran Construction with assistance in implementing various cost savings initiatives. Thomas's contract specifies that it will receive a flat fee of $66,000 and an additional $36,000 if Bran reaches a prespecified target amount of cost savings. Thomas estimates that there is a 25% chance that Bran will achieve the cost savings target. Required: 1. Assuming Thomas uses the expected value as its estimate of variable consideration, calculate the...
Exercise 6-9 (Algo) Variable consideration; estimation and constraint (LO6-6) Thomas Consultants provided Bran Construction with assistance in implementing various cost savings initiatives. Thomas's contract specifies that it will receive a flat fee of $69.000 and an additional $39.000 if Bran reaches a prespecified target amount of cost savings. Thomas estimates that there is a 25% chance that Bran will achieve the cost savings target Skiped Required: 1. Assuming Thomas uses the expected value as its estimate of variable consideration calculate...
Problem Rest recognitive-multiple performance obligations and variable carte pe Part 16 points turele Incscils cell phones to customers at $1.440 each. The company also sells cell phone plans with unlimited data at $80 per month for 90 per year). If a customer purchases a package which includes a cell phone and 12-month cell phone service with unlimited date the cha i s SIKINI On November 1, 2018, Fuluneec sold a package and the cell phone service plan was initiated immediately....