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Revenue

1.5 Step 4: Allocate the transaction price

The total transaction price should be allocated to each performance obligation in
proportion to standalone selling prices.

Transaction price

Performance Performance
obligation 1 obligation 2

If a standalone selling price is not directly observable then it must be estimated.
Estimation methods include a residual approach, or a cost-plus approach.

Illustrations and further practice

Now try TYU 5 from Chapter 4.

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