The transaction price is the amount of consideration an entity expects to be entitled to, excluding amounts collected on behalf of third parties (like sales taxes). When determining this price, the entity must account for variable consideration, significant financing components, non-cash considerations, and consideration payable to the customer.

Variable consideration (e.g., discounts, rebates, performance bonuses, penalties) must be estimated using either:

An entity can include variable consideration in the transaction price only to the extent that it is highly probable (IFRS) or significantly probable (US GAAP) that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved.