Revenue toolkit: Step three—Determine the transaction price

In our Toolkit podcast series, we are taking a deep dive into one accounting topic each month that goes beyond the basics and into areas that require judgment. This month, we are covering each of the five steps in the revenue recognition model.

In this episode, Heather Horn was joined by Angela Fergason and Alexandra Pascu from PwC’s National Office, to discuss step three of revenue recognition: determining the transaction price.

In this episode, you will find:

• 3:18 - Determining whether the contract contains significant financing components
• 7:52 - How noncash and variable consideration impact the transaction price
• 12:32 - Methods for estimating variable consideration, and considering the measurement constraint
• 19:54 - The key judgments needed for service level agreements or similar arrangements
• 24:54 - Evaluating payments to customers as a form of variable consideration, and how they impact the transaction price
• 26:58 - Key takeaways: step three in a nutshell, and additional resources

Want to learn more? 

• Read the Determining the transaction price chapter in our Revenue guide.
• Listen to our previous podcasts on Variable consideration: How it impacts your top and bottom line and Payments to customers? Receipts from vendors? Help!.

Angela Fergason is a partner in PwC's National Office with over 20 years of experience who specializes in accounting for revenue and employee compensation arrangements. She also consults on a range of financial reporting issues impacting technology companies. Angela is a frequent speaker on accounting and financial reporting topics and is a contributor to many PwC National Office publications, including our accounting guides on revenue and stock-based compensation.

Alexandra Pascu is a director in PwC’s National Office with over 9 years of experience. She focuses on revenue recognition, software costs, stock-based compensation, and inventory. Prior to this role, Alexandra  led audits of companies ranging from small emerging growth companies to public multinationals.

Heather Horn is PwC’s National Office thought leader, responsible for developing our communications strategy and conveying firm positions on accounting and financial reporting matters. She is the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series, as well as periodic webcasts for the power and utilities industry. With over 30 years of experience, Heather’s accounting and auditing expertise includes financial instruments and rate-regulated accounting.

Transcripts available upon request for individuals who may need a disability-related accommodation. Please send requests to us_podcast@pwc.com.