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Under Ind AS 115, an entity may include estimated variable consideration in the transaction price only to the extent that:
AManagement considers the estimate to be more likely than not (>50%)
BIt is highly probable that a significant reversal in the cumulative amount of revenue recognised will not occur when the uncertainty is resolved
CThe customer has acknowledged in writing the variability component
DThe estimate is below 10% of the contract's fixed consideration
Answer & Solution
Correct answer: B. It is highly probable that a significant reversal in the cumulative amount of revenue recognised will not occur when the uncertainty is resolved
Para 56 — the constraint threshold is "highly probable that a significant reversal will not occur," which is higher than the "more likely than not" (>50%) threshold used elsewhere. The constraint considers both the likelihood AND magnitude of potential reversal, factoring in volatility, time-to-resolution, breadth of possible outcomes, and the entity's experience.
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