Revenue accounting reset – Variable consideration

We continue our revenue accounting miniseries with an episode taking a closer look at variable consideration—an essential and sometimes complex element in determining transaction price. From performance bonuses to volume-based rebates, we explore how to estimate and constrain variable amounts as well as when key exceptions apply.In this episode, we discuss:0:58 – Why variable consideration is a critical element of the ASC 606 model7:00 – The general model for estimating variable consideration9:02 – Applying the constraint on the amount of variable consideration18:25 – Common types of arrangements that include variable consideration, such as volume-based rebates and discounts20:59 – Key exceptions to the general model:21:10 – Sales- or usage-based royalty exception26:04 – Variable consideration allocation exception30:24 – Right-to-invoice measure of progress exceptionFor more information, see chapter 4 of our Revenue from contracts with customers guide. You can also listen to the first episode in this series, Revenue accounting reset – Recognizing revenue.Be sure to follow this podcast on your favorite podcast app and subscribe to our weekly newsletter for the latest thought leadership.About our guestsAngela Fergason is a partner and standard setting leader in PwC's National Office who specializes in accounting for revenue and employee compensation arrangements. She also consults on a range of financial reporting issues impacting technology companies.Chris Bourdon is a partner in PwC's National Office who specializes in accounting for revenue, inventory, and employee compensation arrangements. He also consults on a range of financial reporting issues impacting technology, media, and entertainment companies.About our hostHeather Horn is the PwC National Office Sustainability and Thought Leader, responsible for developing our communications strategy and conveying firm positions on accounting, financial reporting, and sustainability matters. In addition, she is part of PwC’s global sustainability leadership team, developing interpretive guidance and consulting with companies as they transition from voluntary to mandatory sustainability reporting. She is also the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series.Transcripts available upon request for individuals who may need a disability-related accommodation. Please send requests to [email protected]. Did you enjoy this episode? Text us your thoughts and be sure to include the episode name.