In measuring the transaction price, explain the accounting for (a) time value of money and (b) noncash consideration.

Time value is a financial conceptthat helps to state that money received now is worth more than later money. This is true because the money you have now may be invested and produce a profit, resulting in a more significant sum of money in the future.

When a sales transaction has a significant financing component (interest is accumulated on consideration to be paid overtime), the fair value (transaction price) is calculated by measuring the consideration received or discounting the payment using an imputed interest rate. The imputed interest rate is either:

An issuer issues the current rate for a similar instrument with a similar credit rating.

A rate of interest that reduces the nominal amount of the instrument to the current sales price of the products or services. The corporation will record the financing's consequences as either interest expense or capital expenditures.

The transaction price is the amount of money that an entity expects to receive in exchange for products or services, and it is recorded at its fair value. When a consumer makes a payment with a non-cash consideration, the fair value of that consideration may not be as clear as it is if the customer makes a monetary payment. In a situation where customers pay by means other than cash, the asset's fair value is assumed to be equal to the sale price of the goods or services