Step 3: Determine the Transaction Price
Measuring Consideration
The transaction price is the amount a company expects to receive in exchange for transferring promised goods or services. It may include fixed amounts, variable consideration, financing components, noncash consideration, or payments to customers.
- Fixed contract price.
- Variable consideration such as bonuses or discounts.
- Expected rebates and refunds.
- Significant financing components when payment timing differs substantially.
Note
Variable consideration is included only to the extent it is probable that a significant revenue reversal will not occur.
Summary
The transaction price reflects the expected consideration after accounting for uncertainty and contract terms.