Revenue – ifrs 15 handbook

3.1.2 
Determine the amount for which it is highly probable 
that a significant reversal will not occur (‘the constraint’)
IFRS 15.56
After estimating the variable consideration, an entity may include some or all of 
it in the transaction price – but only to the extent that it is highly probable that a 
significant reversal in the amount of cumulative revenue will not occur when the 
uncertainty associated with the variable consideration is subsequently resolved.
IFRS 15.57
To assess whether – and to what extent – it should apply this ‘constraint’, an entity 
considers both the:
– likelihood of a revenue reversal arising from an uncertain future event; and 
– potential magnitude of the revenue reversal when the uncertainty related to the 
variable consideration has been resolved. 
In making this assessment, the entity uses judgement, giving consideration to all 
facts and circumstances – including the following factors, which could increase the 
likelihood or magnitude of a revenue reversal.
– The amount of consideration is highly susceptible to factors outside the entity’s 
influence – e.g. volatility in a market, the judgement or actions of third parties, 
weather conditions and a high risk of obsolescence.
– The uncertainty about the amount of consideration is not expected to be resolved 
for a long time.
– The entity’s experience with (or other evidence from) similar types of contracts is 
limited or has limited predictive value.
– The entity has a practice of either offering a broad range of price concessions 
or changing the payment terms and conditions of similar contracts in similar 
circumstances.
– The contract has a large number and a broad range of possible consideration 
amounts.
IFRS 15.59
This assessment needs to be updated at each reporting date. 
IFRS 15.58
There is an exception for sales- or usage-based royalties arising from licences of IP 
(see 
Section 9.6
).

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58 | Revenue – IFRS 15 handbook