Companies Can Use the Expected Value to Estimate Variable Consideration When

The third stride of the acquirement recognition method is to determine the transaction price. The transaction price represents the amount of consideration the company expects to exist entitled to in commutation for the goods and services it provides to a customer. Stock-still consideration should e'er be included in the transaction cost. Variable consideration, on the other hand, should just be included to the extent that the visitor expects to be entitled to the consideration. This article will ascertain variable consideration, give examples of the two methods to gauge it, and describe how to determine if at that place is any constraint.

Variable Consideration

Variable consideration tin can come in many forms, such as discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, rights of return, and prompt payment discounts. Sales- and usage-based royalties have unique guidance separate from the guidance discussed hither. Variable amounts of consideration may be explicitly stated in the contract, just implicit variability too qualifies as variable consideration. For case, if price concessions are typical in a particular industry nether similar circumstances, the consideration should be considered variable.

VMware, Inc. (2018 SEC Correspondence): Variable Consideration

"Rebates are variable consideration in accordance with ASC 606-10-32-five through 32-9 and are accounted for as a reduction to the transaction price on eligible contracts. As rebates are based on eligible sales during the quarter or based on actual achievement to quarterly target sales, actual payout rarely differs from the amounts reserved" (Baronial 2022 alphabetic character to the SEC).

Athenex, Inc. (2019 SEC Correspondence): Variable Consideration

"We considered [the milestone for delivering satisfactory review of information and the milestone for CMC (chemistry, manufacturing, and control) development] to be variable consideration, as the entitlement to the consideration is contingent on the occurrence or nonoccurrence of future events. The Company analyzes whether the milestone is considered probable of existence reached and estimates the amount to be included in the transaction toll using the 'most likely amount' method from ASC 606-10-32-8. We considered the [first] milestone to exist variable consideration because the receipt of the consideration is fully dependent on the commitment and satisfactory review of the IP development data […]. We also considered the [second] milestone to be variable consideration because the receipt of the consideration is fully dependent on the delivery and satisfaction of the line extension data" (May 2022 alphabetic character to the SEC).

Methods for Estimating Variable Consideration

ASC 606 allows two methods for estimating variable consideration: (1) expected value and (2) most likely corporeality. A company should choose the method that volition provide the all-time gauge of the amount to which it volition be entitled.

Expected Value

The expected value approach is carried out by finding a range of possible consideration amounts, weighting those amounts past their respective probabilities, and then summing the probability-weighted amounts to generate a single number that represents the expected value of consideration to be received from the client.

Example A: Expected Value Method

Entity A enters into a contract to perform a project for Customer B. It enters into like contracts often. When Entity A completes the project by the borderline, it will be entitled to $500 of consideration. Entity A will besides be entitled to an additional $50 of compensation for every business day ahead of the deadline it completes the project. For instance, if Entity A finishes a calendar week ahead of schedule, it will receive an extra $250 of bounty.

Analysis: Based on its by performance in similar contracts, Entity A estimates a 30 pct likelihood of finishing on the date scheduled, a fifty percentage likelihood of finishing a calendar week ahead of schedule, and a twenty per centum likelihood of completing the project two weeks ahead of schedule. Using the expected value approach, Entity A calculates the post-obit probability-weighted amounts for each scenario:

Completion Fourth dimension	Consideration Due	Probability	Probability-weighted Amount
On schedule	$500	30%	$150
1 calendar week ahead	$750	50%	$375
Two weeks alee	$i,000	20%	$200
Expected Value:			$725

Summing these probability-weighted amounts, the company would utilize $725 as the total transaction price. The company would then consider the constraint, as discussed afterwards in this article.

The expected value approach works particularly well with the portfolio method of aggregating client contracts. Even if the company is not using the portfolio method practical expedient, but withal has many similar contracts, this approach may be appropriate. If management makes reasonable estimates and applies them to a large number of like contracts, the aggregate amount of revenue should reflect the sum of all the expected amounts from the individual contracts. The expected value approach also works well in situations where a spectrum of amounts is possible, equally shown in Example A above.

Most Likely Amount

When using the most likely amount, the transaction price for the contract is the amount that is most likely to be received. This method works well in situations with only two possible outcomes. If just two real possibilities be, using an expected value approach would likely result in a transaction price that is significantly unlike than either of the two possible outcomes. In such cases, the virtually likely method may be more appropriate considering it produces a better estimate of the consideration the company expects to receive. However, this method may be difficult to apply when one outcome is not significantly more likely than the other.

Example B: Virtually Likely Corporeality Method

Entity C recently introduced a new service line. One of Entity C's start contracts for this new service is with Customer D. Customer D agrees to pay $500 if Entity C achieves minimum specifications and $1,000 if Entity C also achieves additional specifications.

Contempo comment letters from the Securities and Exchange Commission (SEC) accept asked companies to explain their awarding of the most likely amount method much more often than the expected value method. Here are a few examples:

Arqule, Inc. (2019 SEC Correspondence): Most Likely Amount

Arqule explained how it determines the variable consideration for its drug licensing agreements. "At contract inception the Company evaluates whether milestones are considered probable of existence achieved, and to the extent that pregnant reversal would not occur in future periods, estimates the amount to be included in the transaction toll using the most likely amount method. Milestone payments that are subject to the judgments and actions of a 3rd party, such as regulatory approvals, accept significant uncertainties and are excluded from the transaction price until those approvals are received. The Company updates its estimates for milestones at each reporting date until the incertitude is resolved. Lastly, the Company considered ASC 606-10-55-65, which provides that sales-based royalties promised in exchange for a license of intellectual property should be recognized at the afterward of when the subsequent auction occurs or when the performance obligation is satisfied."

For the two specific license agreements nether discussion, "the Company'due south receipt of the development and regulatory milestone consideration was contingent upon future events and was considered variable consideration. At contract inception, the development and regulatory milestones did not run into the recognition criteria in ASC 606-10-32-11 as achieving the milestones was not considered the well-nigh likely issue and were therefore excluded from the transaction toll" (June 2022 letter to the SEC).

Philip Morris International, Inc. (2018 SEC Correspondence): Almost Likely Amount

"In determining the transaction price, PMI estimates any relevant variable consideration based on the virtually likely corporeality PMI expects to exist entitled to under the terms of the contract taking into consideration historical feel of disbelieve or rebate redemption where relevant. Based on the evaluation of the factors set out in ASC 606-10-32-12, in the context of the PMI discount and incentive programs, PMI concluded that the potential reversal of whatsoever pregnant variable consideration is not probable and therefore such variable consideration is non constrained" (September 2022 letter to the SEC).

PDL BioPharma, Inc. (2018 SEC Correspondence): Nearly Likely Amount

"The revenue reduction we estimate using the about likely method relates to prompt pay discounts. It is appropriate to apply the most probable method to this approximate as the variable consideration has just ii possible outcomes and the single most likely outcome is that the discount will be taken. Therefore, the Company has recorded a acquirement reduction for the full amount of the disbelieve. To date, actual prompt pay discounts have not differed materially from the Company's estimates" (August 2022 letter to the SEC).

WABCO Holdings, Inc. (2018 SEC Correspondence): Virtually Likely Amount

The SEC staff asked WABCO to explain why they felt the most probable method was better than the expected value method for their book discounts. WABCO explained, "The volume discount offered to the client is typically binary in nature. That is, either the customer receives the discount or they do not. In certain instances, contracts with customers may provide a express number of outcomes for book discounts based on sure qualitative factors.

"In improver, the well-nigh probable corporeality is considered to exist the nearly appropriate method to estimate volume discounts based on the fact that the volume disbelieve offered is specific to the customer, the contract and other factors such as specific strategic initiatives. Each of the customer relationships is managed past a dedicated account squad, who is in a position to estimate the sales book and determine the appropriate volume discount. Therefore, the Visitor believes that because that the majority of book discounts offered to the customer are binary, and thus containing simply two possible outcomes, the well-nigh probable method would be the more than advisable method for estimating the amount of book discounts" (May 2022 letter of the alphabet to the SEC).

The Constraint on Variable Consideration

After applying one of the two methods to estimate the variable consideration, entities must overcome one more than hurdle. The consideration can only be included in the transaction price "to the extent that it is likely that a significant reversal … will not occur" (606-10-32-11). Probable is defined as "probable to occur" which is a college standard than "more than likely than non." Making this determination involves significant judgment and must include assessment of both the likelihood and the magnitude of the potential acquirement reversal. The process does non take to be separate from the estimation of variable consideration, but all principles of the constraint must be considered.

A meaning reversal of revenue could occur when the variable consideration is allocated to a operation obligation that is completely or partially fulfilled by the fourth dimension the dubiousness is expected to exist resolved. If the consideration will be paid or determined before whatsoever variable consideration is recognized as revenue, no constraint is needed.

Factors that Increase the Probability of Reversal

Analysis of the constraint is intended to be largely qualitative. ASC 606-10-32-12 lists factors that potentially increase either the probability or magnitude of a revenue reversal (emphasis added):

The corporeality of consideration is highly susceptible to factors exterior the entity'due south influence. Those factors may include volatility in a market, the judgment or actions of third parties, weather weather, and a loftier risk of obsolescence of the promised good or service.
The dubiousness well-nigh the amount of consideration is not expected to be resolved for a long flow of time.
The entity's experience (or other evidence) with similar types of contracts is express, or that feel (or other prove) has limited predictive value.
The entity has a do of either offering a broad range of price concessions or irresolute the payment terms and conditions of like contracts in similar circumstances.
The contract has a large number and wide range of possible consideration amounts.

These factors are neither spread-out nor formative. The existence of one, or fifty-fifty multiple, of the above factors does non necessarily create an expectation that a meaning amount of revenue will eventually opposite. Additionally, factors across those listed, such every bit the legal and regulatory environment, could impact the likelihood and magnitude of potential reversals.

In their responses to SEC comment letters, companies often use the inverse of these factors as evidence that variable consideration is not constrained. For example, if limited feel with a blazon of contract makes information technology more likely that variable consideration should exist constrained, then extensive feel may assistance a company understand whether an amount is likely to contrary and, therefore, whether that corporeality should exist constrained.

Likelihood vs. Magnitude

The standard does non explicitly specify the relative priority entities should give the likelihood and magnitude criteria. Some might interpret the standard to hateful that an amount that does not create a significant reversal could come across a lower likelihood threshold than i that was meaning. Even so, the cadre principle of the standard is to "recognize acquirement to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services" (ASC 606-ten-05-3). If the company does not expect to be entitled to an corporeality—of whatever magnitude—this amount should be excluded from the transaction cost before the constraint is even considered (FASB, Question 30). The magnitude criterion plays a bigger part as the size of a potential reversal increases relative to the contract. Every bit the magnitude of the consideration increases, management must have more substantive back up for its assertion that a potential reversal is not likely.

More substantive back up may likewise be necessary if a visitor determines that variable consideration in a contract falls near the range considered to exist probable. The standard does not provide percentage thresholds to determine what is considered probable or significant; the following is merely an example. If a contract includes variable consideration that is not pregnant to the remainder of the contract, and that variable consideration is between 70 and 75 percent probable non to contrary, a company might conclude that a year of experience with like contracts is adequate to support the conclusion that such an amount demand not exist constrained. On the other hand, if that variable consideration accounted for 25 percent of the total contract consideration, the company would likely need more than extensive experience with similar contracts to back up the inclusion of that amount.

Example C: Variable Consideration Non Constrained

In Instance A higher up (in which Entity A is entitled to increasing bonus amounts the before it completes the project), the variable consideration would likely non be constrained. The potential acquirement reversal could be upwardly to $225—the estimated transaction price in backlog of the fixed consideration of $500. The $225 is 31 percent of the transaction toll, which is probable pregnant in magnitude.

Yet, because (1) Entity A enters into these types of contracts frequently, (two) the entity considered this experience in determining the probabilities to use in the expected value calculation, and (three) none of the factors in paragraph 32-12 are nowadays in this example, Entity A concludes that the expected value does not include amounts likely to reverse in the hereafter. The $225 would be reversed merely if Entity A fails to consummate the projection early—an issue with just a 30 percent likelihood.

Example D: Variable Consideration Constrained

In Example B above (in which Entity C determined a 70 percent likelihood of receiving the college amount of $i,000), the variable consideration would likely exist constrained. The potential acquirement reversal could exist $500 (fifty percentage of the transaction price), which is pregnant in magnitude. Moreover, Customer D is ane of Entity C's first customers for the new service line, indicating that Entity C has express experience with this type of contract.

Considering of these uncertainties, Entity C would likely conclude that the $500 variable consideration should be constrained. Nonetheless, Entity C should not default to constraining its variable consideration to $0; rather, it should estimate the amount for which a significant reversal is not likely to occur. Entity C might summate a range of worst-case scenarios and determine that $100 of variable consideration can be included in the transaction price for this contract.

Emergent BioSolutions, Inc. (2019 SEC Correspondence): Variable Consideration Constraints

"The Visitor evaluated and concluded no constraint would exist necessary on the variable consideration [of cost-plus-fixed-fee development contracts with the The states Government (USG)]. There was low uncertainty about the amount of variable consideration equally the consideration reflected a toll build-upwardly for internal and external costs, plus a specified mark-upwards. The Company has all-encompassing history with performing services for the USG by preparing a cost-based upkeep to make up one's mind the total consideration for its USG contracts. The Company's experience with other cost-plus arrangements is that it has historically used all available and canonical funding. Based on the electric current condition of the development projects and the expectation that the Company will perform the required development services and collect the consideration in total, the Company concluded it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and no constraint was necessary on the variable consideration as of September 30, 2018. The Visitor performs similar assay on variable consideration and the related constraint (or lack thereof) at each reporting period" (January 2022 letter to the SEC).

Omnicom Group, Inc. (2018 SEC Correspondence): Variable Consideration Constraints

"We tin can reasonably estimate our commission revenue, including tiered or scaled commissions. Nevertheless, ASC 606-10-32-12 (a) requires that an assessment be made such that it is probable there volition non be a pregnant reversal of cumulative revenue. The inherent cancellation rights prior to the run engagement represent a significant constraint on the amount of revenue we will ultimately receive. Our assessment that revenue is subject to a constraint is based on the post-obit: (i) the ability for the client to cancel the media equally provided by the contract with the media vendor and/or (ii) the rights of the media provider nether the contract to cancel or postpone airing, including preemption, network manual availability and other contingencies included in the contract" (August 2022 letter to the SEC).

eHealth, Inc. (2019 SEC Correspondence): Variable Consideration Constraints

"Judgments that can be meaning in estimating transaction price are related to the constraint. To determine the constraints to exist applied to LTV [lifetime value commissions], the Company compares prior calculations of LTV to bodily cash received and reviews the reasons for any differences. The Company then applies judgment in assessing whether the departure betwixt historical cash collections and LTV is representative of differences that can be expected in future periods. The Visitor besides analyzes whether circumstances take inverse and considers any known or potential modifications to the inputs into LTV and the factors that tin can bear upon the corporeality of cash expected to be collected in time to come periods such as commission rates, carrier mix, policy duration, changes in laws and regulations, and cancellations of insurance plans offered by health insurance carriers with which the Company has a relationship" (September 2022 letter of the alphabet to the SEC).

Revance Therapeutics, Inc. (2018 SEC Correspondence): Variable Consideration Constraints

In a collaboration understanding, Revance gave Mylan an exclusive, worldwide license to Revance's IP for a biosimilar (a medical product similar to another that is already approved) to the product BOTOX. Revance has certain obligations to proceed evolution of the product to a certain betoken, and Mylan has the option to end or continue the agreement at a certain betoken. The SEC asked for details of Revance's judgments in determining the consideration to be included in the transaction toll from these milestones. Revance explained:

"In determining whether the consideration associated with the individual milestones should be included in the transaction toll, as there can be only ii outcomes with respect to each milestone, we practical the near probable amount method. We further incorporated into our estimates the impact of the constraint.

"It is of import to note that in a collaboration like the 1 with Mylan, payment of milestones is synonymous with continuing the evolution activities and continuation of the agreement itself. […] Accordingly, there is an inherent link between the amount of the consideration the Company is entitled to, and the book of services it will be ultimately required to perform.

"To determine the transaction toll, including the impact of the constraint, we developed a recognition model that incorporates the expected progress of the collaboration and when the events underlying various milestones are expected to occur. We use this model to make up one's mind how much revenue is recognized in each menstruum based on the measure out of progress nosotros concluded is most advisable, which is the value of internal labor and 3rd-party services used during the initial and development phases. We too use this model to decide the impact of the constraint.

"The transaction price includes the nonrefundable upfront fee, price-sharing payments, equally well as certain milestones due prior to the successful completion of the Stage 3 clinical trials (specifically, the FDA Advisory Milestone and [confidential milestones]). In the application of the measure of progress, the inclusion of the cost-sharing payments and certain milestones in the transaction price equally described above, at no point results in a scenario where the revenue recognized exceeds the greenbacks received to engagement. Therefore, information technology is non probable that a significant reversal of cumulative revenue recognized would occur, regardless of whether Mylan exercises the option and whether the collaboration progresses equally expected.

"The remaining milestones were non included, as these could upshot in a significant reversal of revenue" (October 2022 letter to the SEC).

The SEC staff asked for additional explanation, asking how no scenario exists "where the revenue recognized exceeds the cash received to date." Revance offered the post-obit responses:

"There is no scenario under this ended full transaction price in which a significant (or whatsoever) reversal of acquirement is possible when the uncertainties associated with the milestones are subsequently resolved. This is further illustrated outlining the following three unlike situations described below:

If Mylan decides not to practice choice to continue (i.eastward. non pay the Continuation Decision milestone) – As of the expected date for the Continuation Decision, the Company would non withal have recognized the entire upfront payment of $25 meg as revenue, so if Mylan decided not to keep, the Visitor would recognize the remaining portion of the upfront payment as revenue and there is no reversal of the cumulative revenue recognized.
If Mylan pays the Continuation Decision milestones, merely the [confidential 1] milestone event thereafter does not accept place – If Mylan decided to exercise the selection to continue, it would trigger a Continuation Determination milestone payment … . Equally of the [confidential i] milestone event, the Company would non yet have recognized the entire payments received to date as revenue, and then if the [confidential one] milestone event does non accept place and the agreement is dissolved, the Company would recognize the remaining portion of the contract liability as revenue and there is no reversal of the cumulative revenue recognized.
If Mylan decides to continue through [confidential two] – Mylan would have paid the $25 million upfront payment and $40 million of milestones and near of the estimated internet cost-sharing payments to-engagement. At no point during the [confidential two] would the Company have recognized the entire payments received to date equally revenue. Therefore, if the trial stopped and the agreement is dissolved, the Company would recognize the remaining portion of the contract liability as revenue and there is no reversal of cumulative revenue recognized.

"Based on our assessment we have appropriately estimated the total transaction price and there is no possibility of a significant reversal of cumulative revenue associated with any variable consideration included in the full transaction cost.

"Whatsoever alternative scenario with a college transaction toll (e.g., past including the next milestone) would effect in scenarios where the cumulative acquirement recognized would be higher than cumulative cash received at points in time, during which a reversal of cumulative revenue would occur if the next milestone event beyond the bespeak of constraint does not trigger (i.eastward. the uncertainty is not favorably resolved)" (November 2022 alphabetic character to the SEC).

Cross Land Healthcare, Inc. (2018 SEC Correspondence): Variable Consideration Constraints

In some of Cross Country's contracts, it agrees to fill a certain percentage of open positions for its clients, known equally fill rate guarantees. The SEC staff questioned whether Cross Country treated these guarantees every bit variable consideration. The company explained:

"Fill charge per unit guarantees specify a penalty to exist paid past the Company in the event that certain fill rate percentages are non accomplished with a client. These types of guarantees are limited to and but included in sure of our larger Managed Services Programme (MSP) contracts. In instances where our MSP contracts incorporate these fill up charge per unit guarantees, we more often than not accept been able to meet the required fill up rate percentages, and, every bit a upshot, the penalties are rarely triggered.

"Pursuant to ASC 606-10-32-5 and ASC 606-ten-32-vi, nosotros identified the fill rate guarantees every bit performance-based penalties that issue in variable consideration, notwithstanding, adjustments to the transaction price accept not been made because it was probable that a pregnant reversal in the corporeality of cumulative acquirement recognized will not occur when the dubiety associated with the variable consideration is later resolved" (September 2022 letter to the SEC).

Additional Issues Related to Variable Consideration

Several additional issues are relevant to the variable consideration discussion. Here are a few of those issues:

Should the constraint on variable consideration be practical at the contract level or operation obligation level?

Contract level. In its 2022 Q&A, the Financial Accounting Standards Board (FASB) addressed whether the magnitude of a potential reversal should be assessed at the level of the performance obligation or at the level of the contract. While the standard does not specifically accost this event, the Basis for Conclusions paragraph 234 clearly states that the unit of account for determining the transaction price in a contract is the contract (ASU 2014-09). Equally the constraint is primarily a transaction price issue, the FASB agreed that the contract should be seen every bit the unit of account for the constraint too (FASB, Question xxx). In other words, when considering the magnitude of a potential reversal of variable consideration, the assessment should be based on the total consideration of the whole contract, not merely on amounts specific to the variable consideration or to the specific performance obligation.

Can the most likely corporeality and expected value approaches be used in the aforementioned contract?

While the two approaches should not be applied simultaneously to the same source of variable consideration within a contract (or amass group of similar contracts), they may be applied separately to different sources of variable consideration within the aforementioned contract (BC202). For example, if a contract includes both a bonus for early completion of a project (which scales with the number of days ahead of schedule) and a quality bonus if a project exceeds certain specifications, a visitor may apply the expected value approach for the early completion bonus and the most probable arroyo for the quality bonus.

Is consideration variable if the toll per unit of measurement is fixed but the units are variable?

In its 2022 Q&A, the FASB addresses the issue of whether variable consideration is present if a contract includes an undefined quantity of outputs, simply the price is stock-still (FASB, Question 41). For case, assume a transaction processor charges $0.001 per processed transaction but does non have a fixed quantity of transactions that must be processed. The staff cited the following argument from ASC 606-ten-32-half-dozen: "The promised consideration besides tin can vary if an entity'south entitlement to the consideration is contingent on the occurrence or nonoccurrence of a future event." With this in heed, the staff ended that the transaction cost would exist variable if the nature of the promise is to perform an unknown quantity of tasks throughout the contract catamenia and the consideration is contingent on the quantity completed.

How did the FASB decide on the constraint?

In the Basis for Conclusions of Bookkeeping Standards Update (ASU) 2014-09, the FASB indicates that the constraint was strongly influenced by the big number of respondents to Exposure Drafts who indicated that the virtually useful revenue effigy would exist one that would not contrary in a futurity period. The FASB noted that the constraint introduces a definite downward bias into acquirement numbers. However, it felt this treatment was appropriate in trying to avoid meaning reversals of revenue, making the revenue numbers more useful (BC206-BC207). Nonetheless, while the FASB and respondents did not wish to include acquirement likely to contrary, not including variable consideration in transactions prices could seriously understate revenues, which would even so lead to reporting less relevant and useful information. This interplay led to the constraint.

Specifying a level of confidence (i.e., use of the linguistic communication "probable" [US Generally Accepted Accounting Principles (GAAP)] and "highly probable" [International Fiscal Reporting Standards (IFRS)]) also received significant attention from the FASB. While the staff initially considered not specifying a level of conviction at all, preparers and auditors indicated that constraining estimates would be very difficult and would outcome in a great deal of diversity in practice if no guidance were given on the necessary level of confidence. Thus, the criterion of coming together a level of confidence is intended to facilitate preparation and reduce diversity in practice. The specific level of confidence to be used was as well discussed, and the FASB decided to apply wording already present and divers in other standards for clarity.

Conclusion

Estimating variable consideration requires meaning judgment by preparers and auditors. ASC 606 requires companies to include variable consideration in the transaction toll of each contract only to the extent that it is not probable that a significant reversal of revenue will occur for that amount. Companies are required to determine both the likelihood and the magnitude of potential reversals to correctly determine what amounts should be constrained. The constraint requires the nearly judgment when variable amounts are near the "probable" threshold.

Resources Consulted

ASC 606-10-32-ii to 32-13
ASU 2014-09: "Revenue from Contracts with Customers." BC206-BC207, BC218, 234.
EY, Financial Reporting Developments: "Revenue from Contracts with Customers." January 2020. Section 5.two.
FASB, "Acquirement Recognition Implementation Q&Equally." January 2020. Question 30, Question 41.
KPMG, Issues In-Depth: "Revenues from Contracts with Customers." December 2019. Section 5.iii.
PWC, "Revenue from contracts with customers." August 2019. Section 4.3.

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Source: https://www.revenuehub.org/variable-consideration-constraint/