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EXAMPLE: ALLOCATION OF TRANSACTION PRICE TO MULTIPLE
PERFORMANCE OBLIGATIONS
A contractor has a contract to build an airport terminal and runway for a contract price of $140 Million.
If the terminal and the runway are considered separate performance obligations, an estimate of the
price of each stand-alone project needs to be determined: $125 Million for the terminal and $25
Million for the runway, for a total of $150 Million on a stand-alone basis (the stand-alone value can be
determined by either expected cost plus a margin or estimated market value) The contract price would
be allocated as follows:
Terminal: ($125M / $150M) * $140M = $116.7 Million
Runway: ($25M / $150M) * $140M = $23.3 Million
Assessing Multiple Performance Obligations (continued)
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