Final answer:
The transaction price for a variable payment from a customer should be estimated using either an expected (probability-weighted) outcome or the most likely outcome method, based on which provides a better prediction of the payment to be received, per management's judgment. d. expected (probability-weighted) outcome or most likely outcome, depending on which answer gives the most conservative measure of the consideration to be ultimately received.
Step-by-step explanation:
When determining the transaction price for a payment from a customer that is variable rather than fixed, the guidance suggests that the transaction price should be based on the expected (probability-weighted) outcome or most likely outcome, depending on which method better predicts the consideration that will be ultimately received, based on management's judgment.
This reflects the fact that real-world financial calculations must take into account the complexity of variables such as interest rates and the borrower's credit risk, which can change over time. Therefore, the selection between an expected value or most likely outcome approach will depend on the specific circumstances of each variable payment. In either case, the goal is to determine the most accurate reflection of what the future payments are worth in the present.