Variable Consideration and 5 Steps to Consider for Implementation March 26, 2019 By: Claudia R. Wolter Variable consideration can change your transaction price in that the contract price is impacted by the amount of variable consideration. It may consist of a change order, an unapproved change order, a claim, bonus or incentive clauses, liquidating damages or penalty clauses, etc. (To learn more or to refresh your memory about variable considerations and the two methods on how to recognize it, click here.) What steps do you need to take to implement this new standard? Determine who within your organization is responsible to read the contracts and identify variable consideration (Maybe the project managers) Educate individuals about variable consideration Determine who in your organization will calculate the amount of variable consideration to be recognized. This includes: Considering all items of variable consideration and Determining the amount to recognize using either: The most likely amount method or The expected value approach Determine if there are changes that should be made in your software in order to assist in tracking variable consideration. Determine if any changes need to be made in internal controls to properly track and account for variable consideration. KatzAbosch has individuals experienced in contractor issues and trained in process improvement using lean six sigma principles that can help you through this transition. If you have any questions about this information please contact your KatzAbosch representative; or contact us by clicking here. Article by: Claudia R. Wolter Claudia Wolter, a Shareholder with KatzAbosch, joined the firm in 1988. She has played a major role in leading the firm into the 21st century with cutting edge initiatives, including the transition to and managing of a paperless environment. She serves as Co-Chair of the firm’s Accounting and Auditing Services Group, assists in the quality control management and oversight of the firm and is a member of the Construction and Real Estate Services Group. Most recently, Claudia served as a contributing author of “Construction Accounting,” an in-depth guide to construction financial and accounting issues for attorneys distributed by the American Bar Association. A dedicated professional, Claudia holds the prestigious distinction of Certified Construction Industry Financial Professional (CCIFP), a certification held by less than 50 professionals in Maryland and less than 1000 professionals in the United States, the designation of Certified Construction Auditor (CCA) from the National Association of Construction Auditors (NACA) and a Lean Six Sigma CPA Green Belt certification from Ohio State University ATI and Boomer Consulting, Inc. About KatzAbosch: Founded in 1969, KatzAbosch is one of the largest CPA and business consulting services in the Mid-Atlantic region. As an accounting firm, our mission is to provide the highest quality accounting, tax, financial and management consulting services to our regional clients. We understand the needs and challenges of our clients and we have made it our obligation to create, grow and protect asset value. KatzAbosch is consistently named a Best Accounting Firm to Work For in Accounting Today and has been named a Top 200 Accounting Firms in the Nation by Inside Public Accounting. Our firm is also ranked among the Top 15 Largest Accounting Firms in the Baltimore Area by the Baltimore Business Journal and a Top Workplace four times by The Baltimore Sun.