Lawyers For U Ltd. is pursuing a class action against the government of Dystopia for widespread corruption and bribery. 50% of Lawyers For U Ltd.’s fees are contingent on the settlement of claims with the Dystopian government. Lawyers For U Ltd. has not constrained the variable consideration because it believes it has a strong case and has 30 years’ experience dealing with class actions with other governments.

Prosecutors Inc. are engaged to prosecute the Dystopian government for commissioning the spraying of chemicals over 10,000 hectares of crops which has led to the contamination of the water ways. 60% of Prosecutors Inc.’s fees are based on the positive outcome of the case. Given the significant uncertainty surrounding the outcome of the case, the estimate of variable consideration must be constrained to zero.

National Pharma Ltd. is developing a new prescription medication on behalf of the Utopian government. 40% of National Pharma Ltd.’s consideration is dependent on regulatory approval of the new prescription medication. National Pharma’s qualified accountant determines that given the medication is being produced specifically for the Utopian government no constraint of the variable consideration is necessary.

Investment Managers Inc. are entitled to a performance bonus of up to MU100,000 if performance targets are met. The expected value is MU70,000. After considering all the facts and circumstances it is determined that MU60,000 is the amount that is highly probable that will not reverse once the uncertainty is resolved. Therefore, MU60,000 is included in the transaction price at the inception of the contract.

IFRS 15 deals with the application of the variable consideration constraint. Which one of the following statements is reasonable?