What does variable consideration mean on the CPA exam?
Variable consideration. Any part of a contract price that is not fixed, such as a bonus, a discount or a refund. Estimated and included only to the extent a significant reversal is not probable.
Defined against ASC 606-10-32-5.
Which CPA exam sections use variable consideration?
Variable consideration appears in the FAR section of the CPA exam.
Other terms defined against ASC 606-10
- contract asset: The right to consideration for goods or services already transferred, where the right still depends on something other than the passage of time.
- contract liability: The obligation to transfer goods or services for which the customer has already paid, or for which payment is unconditionally due.
- performance obligation: A promise in a contract to transfer a distinct good or service.
- revenue recognition: Deciding when a sale becomes revenue.
- transaction price: The consideration an entity expects to be entitled to for transferring goods or services, excluding amounts collected for third parties such as sales tax.
Related terms
- consideration: The bargained-for exchange that makes a promise enforceable.
- allowance for credit losses: The amount set aside for receivables not expected to be collected, estimated over the whole expected life of the asset rather than only once a loss is probable.