IFRS 15Chapter 5Lesson 1
Step 3: the transaction price and variable consideration
Step 1 of 8Learning objectives
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The transaction price is not always the invoiced price: it is the amount the entity expects to be entitled to, excluding amounts collected for third parties. When part of that amount is uncertain (discounts, bonuses, penalties, concessions), the entity estimates it using the expected value or the most likely amount, includes only what is not at risk of a significant reversal, recognises a refund liability for what it will have to pay back and updates everything at each reporting date.
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Learning objectives
- Determine the transaction price of a contract (the amount the entity is entitled to, excluding taxes collected for third parties, assuming the contract is performed as agreed).
- Recognise the forms of variable consideration, whether written in the contract or implicit.
- Estimate variable consideration using the expected value or the most likely amount, choosing the appropriate method.
- Apply the constraint ('highly probable') and reassess the price at each reporting date.
- Record a refund liability and its remeasurement.