Last update 03/02/2020
Part of the main section Measurement – Determining the transaction price – Variable consideration
Examples 20–21 illustrate the requirements in paragraphs 50–54 of IFRS 15 on identifying variable consideration.
Example 20—Penalty gives rise to variable consideration
IE102 An entity enters into a contract with a customer to build an asset for CU1 million. In addition, the terms of the contract include a penalty of CU100,000 if the construction is not completed within three months of a date specified in the contract.
IE103 The entity concludes that the consideration promised in the contract includes a fixed amount of CU900,000 and a variable amount of CU100,000 (arising from the penalty).
IE104 The entity estimates the variable consideration in accordance with paragraphs 50–54 of IFRS 15 and considers the requirements in paragraphs 56–58 of IFRS 15 on constraining estimates of variable consideration.
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