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Other matters that could arise when allocating transaction price are discussed below.

5.6.1 Transaction price exceeds sum of standalone selling prices

The total transaction price is typically equal to or less than the sum of the standalone selling prices of the individual performance obligations. A transaction price that is greater than the sum of the standalone selling prices suggests the customer is paying a premium for purchasing the goods or services together. This could indicate that the amounts identified as the standalone selling prices are too low, or that additional performance obligations exist and need to be identified. A premium is allocated to the performance obligations using a relative standalone selling price basis if, after further assessment, a premium still exists.

5.6.2 Nonrefundable upfront fees

Many contracts include nonrefundable upfront fees such as joining fees (common in health club memberships, for example), activation fees (common in telecommunications contracts, for example), or other initial/set-up fees. A reporting entity should assess whether the activities related to such fees satisfy a performance obligation. When those activities do not satisfy a performance obligation, because no good or service is transferred to the customer, none of the transaction price should be allocated to those activities. Rather, the upfront fee is included in the transaction price that is allocated to the performance obligations in the contract. Refer to RR 8 for further discussion of upfront fees.

5.6.3 No “contingent revenue cap”

A reporting entity should allocate the transaction price to all of the performance obligations in the arrangement, irrespective of whether additional goods or services need to be provided before the customer pays the consideration. For example, a wireless phone reporting entity enters into a two-year service agreement with a customer and provides a free mobile phone, but does not require any upfront payment. The reporting entity should allocate the transaction price to both the mobile phone and the two-year service arrangement, based on the relative standalone selling price of each performance obligation, despite the customer only paying consideration as the services are rendered.
Concerns about whether the customer intends to pay the transaction price are considered in either the collectibility assessment (that is, whether a contract exists) or assessment of customer acceptance of the good or service. Refer to RR 2 for further information on collectibility and RR 6 for further information on customer acceptance clauses.


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