Standalone Selling Price
Using the SSP library
ASC 606 is mostly commonly understood as a that you can read more about on the AICPA site here.
After identifying the contract, determining performance obligations and the transaction price, the next step is to allocate the transaction price to the performance obligations based on the "standalone selling price" or SSP.
The SSP is defined as the price at which a provider would sell a promised good or service separately to a customer.
Once the standalone selling prices have been determined, a provider will apply the relative values to the total contract consideration and estimate the amount of the transaction price to be recognized as each promise is fulfilled.
ASC 606 requires additional consideration and documentation of the standalone selling price or in the case when the standalone selling price is not directly observable or when variable consideration is part of the transaction price.
Determining the SSP
A provider will determine the standalone selling price for each of the performance obligations. This should be done primarily by using available observable transaction history that the provider might already have for the sold item in their own data. The standard does provide alternative methods for determining the SSP when a provider's actual selling price for the same good or service is unavailable, but does not require their use if a more suitable method is available with more observable inputs.
Our Standalone Selling Price Library
REVLOCK supports determining the stand alone selling price of each line item automatically within an order by using a rules based approach. The rules using a matching approach to match the sale order SKU or product code (or a combination of other fields) to "lookup" the rule in the SSP library for each line item.
A simple example best illustrates the concept, here we have order with several line items but let's focus on the "Concepts Micro Seat License Subscription" sold for $150K.
On seeing this product, REVLOCK will go to the configured library and find the corresponding rule (in this case looking it up by product code).
Once the price has been determined the system will automatically use the stand alone price to allocate a price to each line item from an order in the revenue arrangement and determine the relative selling price. You can see this when you click into a revenue arrangement.
Subsequent to this the rest of the revenue workflow also works automatically, going through revenue recognition and managing all balances automatically for you.
Updated on: 14/10/2020