The transaction price in IFRS 15 is defined as the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes).

The transaction price could be a fixed amount, but it may also include variable consideration or may be affected by other factors such as time value of money if the contract includes a significant financing component, non-cash consideration, and consideration payable to the customer.

When a contract has multiple performance obligations, IFRS 15 requires an entity to allocate the transaction price to each performance obligation (or distinct good or service) in an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services. This is done based on the standalone selling prices of each distinct good or service promised in the contract.

If a standalone selling price is not observable, the entity estimates it. Suitable methods include an adjusted market assessment approach, a cost plus a margin approach, or a residual approach (if the selling price is highly variable or uncertain).

The objective of this allocation is to ensure that the revenue recognized would be the same as if the entity had sold each good or service separately to the customer.