Transaction price

The amount a seller expects to be entitled to for what it has promised, including estimated variable consideration. It is allocated across the performance obligations by their standalone selling prices.

Where you will meet it

Transaction price appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Explain the rules for when revenue is recognised
  CFA Level I · Financial Statement Analysis

  “The converged five-step model runs: identify the contract, identify the performance obligations within it, determine the transaction price, allocate that price to the obligations, and recognise revenue as each is satisfied.”

• Contrast the key features of real estate investments that matter for valuation
  CFA Level II · Alternative Investments

  “The trap is treating an appraised value as a transaction price, or comparing a leveraged equity return with an unleveraged property benchmark without adjusting for the debt.”

See also

Performance obligations · Variable consideration

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with T · Glossary