In short
The transaction price is the amount of consideration a company expects to be entitled to in exchange for transferring promised goods or services to a customer, excluding amounts collected for third parties such as sales tax.
Key takeaways
- Determining it is step 3 of the five-step revenue model.
- It includes estimated variable consideration (subject to the constraint) and adjusts for significant financing components and noncash consideration.
- It is then allocated to performance obligations by relative standalone selling price.
Where it's tested
FAR: Revenue Recognition — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A company sells a machine for $100,000 with a 5% volume rebate that historically about 60% of customers claim. How should the company initially estimate the transaction price for a sale where the rebate is expected to be claimed?