The invoice total is not always the transaction price. Start with consideration promised for the transferred goods or services. Measure variable and noncash amounts under their own rules. Separate a significant financing effect when required. Reduce consideration payable to the customer unless it pays for a distinct good or service at an appropriate amount. Exclude taxes or other amounts collected for third parties under the entity's policy and applicable guidance.
Update estimates at each reporting date. A transaction-price change then needs an allocation path. It may go to all obligations or to a specific obligation when the criteria are met. It may also affect satisfied performance through a cumulative adjustment. The arithmetic never supplies that path by itself.
ASC 606-10-32-2 defines transaction price and excludes amounts collected for third parties. 32-3 identifies the five measurement areas: variable consideration, the constraint, financing, noncash consideration, and consideration payable to a customer. The measurement assumes the existing contract will be performed as promised; it does not forecast a cancellation, renewal, or modification under 32-4.
The Cedar binary-bonus example builds the price from supplied inputs. Apply the same control to the independent Summit analysis.
Put the concept to work
Understand this concept
- Explain how fixed, constrained variable, noncash, financing, customer-payable, and third-party-collected amounts enter or leave the transaction price.
Apply this concept
- Compute and reconcile a transaction price from labeled consideration components while preserving estimate date, currency, financing, and constraint assumptions.
Learning resources
Choose a lesson, try an application, or inspect the sources behind this concept.
Build on these ideas
- Contract with a customer — Understand
To understand this concept: Required. Transaction price belongs to the established accounting contract.
- Transaction price — Understand
To apply this concept: Required. Computation follows classification of the consideration components.
Lessons
Worked examples and cases
Practice
Common mistaken ideas
Sources
Related concepts
Use this idea next
- Noncash consideration and consideration payable to a customer — Understand
Required level here: understand. Required. Both components alter the consideration included in transaction price.
- Price concession and credit-loss boundary — Understand
Required level here: understand. Required. Entitlement is established in the revenue model.
- Sales discount — Apply
Required level here: apply. Required. The measurement is an application of the transaction price.
Show 4 more next steps
- Sales discount — Understand
Required level here: understand. Required. The discount is a component of the transaction price.
- Transaction price allocation — Understand
Required level here: understand. Required. The total price must be established before it is assigned.
- Transaction price — Apply
Required level here: understand. Required. Computation follows classification of the consideration components.
- Variable consideration — Understand
Required level here: understand. Required. Variable amounts are measured as part of the transaction price.
Used in these readings
These chapters explain or apply this concept. The label states how the chapter uses it.
- ACC 300: Apply the revenue model Use now