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1. Develop internal control process to identify
variable considerations in each contract.
2. Since prior experience is needed to assess
probability of penalties, create internal
analysis by contract owner and contract
type of the contractor's experience where
penalties applied.
3. Educate project management teams to alert
the accounting department regarding the
inclusion of penalty provision and notifi cation
of likelihood of incurring the penalty.
4. Contractors will need to analyze all claims
outstanding continually (most contractors
already do this).
5. Contractors will need to document the above
issues for all signifi cant claims outstanding
on uncompleted contracts.
6. Additional coordination required between
project managers and project accountants/
fi nance departments of companies.
7. Consider susceptibility to factors outside
the entity's infl uence, such as market
volatility, judgment or actions of third
parties, and weather conditions, as part of
reviewing constraint.
8. When uncertainty about amount of
consideration is expected to be resolved.
9. Experience with similar types of contracts
or limited predictive value of experience.
10. Practice of either off ering a broad range
of price concessions or changing payment
terms and conditions of similar contracts in
similar circumstances.
11. Large number of and broad range of
possible consideration amounts in contract.
Evaluating Variable Consideration (continued)
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