Revenue Recognition Step 3 – Determine the Transaction Price

The third step in the new revenue recognition guidance represents the halfway point within the five-step model to determining when, and how much, revenue to recognize.

The process of determining the transaction price, which is done for the contract as a whole, will continue to require the thoughtful application of principles that we noted in Steps 1 and 2.

The guidance identifies that the nature, timing and amount of consideration all affect the estimate of the transaction price for a contract. These factors result in the following five considerations when determining the transaction price:

  • Variable consideration
  • Constraining estimates of variable consideration
  • Financing components of a contract
  • Noncash consideration
  • Consideration payable to the customer

Learn more in Part 4 of Mayer Hoffman McCann P.C.’s Revenue Recognition Serial: Step 3 – Determine the Transaction Price.

%d bloggers like this: