What is standalone selling price?
Standalone selling price is the price at which a company would sell a promised good or service separately to a customer. ASC 606 uses it to allocate a contract's price: each performance obligation receives a share in proportion to its standalone selling price, so a bundle discount spreads across every obligation unless evidence ties it to some.
How the price is allocated
Each obligation takes the transaction price in proportion to its own standalone selling price. Where no observable price exists, it is estimated from the market, from expected cost plus a margin or, in narrow cases, as a residual.
Allocated price = (Transaction price × The obligation's standalone selling price) ÷ Standalone selling price of every obligation
A worked example
In the illustrative example, Clevis Comfrey Inc's 4 obligations would sell separately for $520,000, and its contract, CTR-2214, prices them together at $480,000.
| Operation | Line | Figure |
|---|---|---|
| Standalone selling price of the 4 obligations | $520,000 | |
| − | Bundle discount in the contract | $40,000 |
| = | Transaction price | $480,000 |
| ÷ | Standalone selling price of the 4 obligations | $520,000 |
| = | Share of its standalone price each obligation receives | 92.3% |
So the platform takes $312,000, implementation $84,000, premium support $57,600 and training credits $26,400: each 92.3% of what it would sell for alone, with the $40,000 discount spread across all 4.
Common mistakes
Using the order form's line prices
A discounted bundle's line prices are a negotiation, not standalone prices. Allocating on them can put the whole discount on one obligation and move revenue into the wrong months.Giving the discount to the item that was negotiated
A discount goes to one obligation only with observable evidence that it belongs there, typically because that item regularly sells at a discount on its own. Otherwise it spreads in proportion.Re-estimating every period
Standalone selling prices are set when the contract begins. A later change in list prices does not re-allocate that contract's price.
How Verlix handles it
The Revenue agent recognises each obligation on its own schedule from the contract's terms. Every journal entry it posts names the contract line behind it.
ASC 606 revenue recognitionRelated terms
ASC 606
The US standard for recognising revenue from customer contracts, in 5 steps.Performance obligation
A distinct promise in a contract, the unit ASC 606 allocates and recognises.