Standalone Selling Price 

Overview 

The standalone selling price(SSP) is the price at which a vendor would sell a promised product (goods or services) separately to a customer.

ASC 606 and IFRS 15 allow for different approaches to establishing a standalone price for products sold. RevRec enables you to easily define rules that can be used to establish standalone prices automatically in full compliance with ASC 606 and IFRS 15.

Following are the different Standalone Price policies that RevRec currently supports.

Standalone Price Policies 

Sale price 

While using this policy, the actual price of the product given at the time of sales order creation is set as the standalone selling price. For example, when a ratable contract is created with products having sale price as $12,000 and $8,000 respectively, the standalone selling price in revenue element will be $12,000 and $8,000.

Standalone 

This policy can be used when you want to exclude a product from revenue re-allocation. RevRec allows you to use a Standalone pricing policy where the logic is to set the actual sales price as standalone selling price.
This policy is designed to treat the product as a pass-through where it does not get re-allocated with other products in the sales order.

In the above example, the Setup Fee with a standalong policy that is sold for $800 does not get re-allocated with other products in the contract.

Dollar Amount 

While using this policy, you can define a standalone numeric price for the product being sold. You can use this policy when you know the actual standalone selling price to be applied and do not depend on RevRec to compute it for the product.

In the above example, while the actual sale price is $3,000 for Product A, RevRec will use $4,000 for transaction price allocation purposes. The revenue is allocated for product A as follows:

Standalone Selling Price of Product A / Total Standalone Selling Price * Total Sale Price

$4,000/$10,000 * $8000 = $3,200

Dollar Amount Range 

This policy can be used when your sales personnel have some flexibility in price while selling products to your customers. You can define a standalone price rule range with minimum and maximum amounts and define an SSP value method that determines how to compute the standalone price from the range. You can set the SSP Value method as follows:

• Mid-Point: The midpoint of the range is applied.
• Boundary: The low or high end of the range, whichever is closer to the sale price is applied.
• Lowest: The low end of the range is applied.
• Highest: The high end of the range is applied.

In the above example, while the actual sale price for Product A is $3,000, RevRec will use $3,200 which is the low end of the standalone price rule range for transaction price allocation purposes. The revenue is allocated for product A as follows:

Standalone Selling Price of Product A / Total Standalone Selling Price * Total Sale Price

$3,200/$10,500 * $10,700 = $3,260.95

Discount Percentage 

RevRec allows you to use an SSP Policy where the Standalone price is computed as a discount on the item list price. While using this policy, you can define a percentage discount given to the customer on top of the list price. Here again, you can define a discount range and an SSP value method for the computation of a Standalone Price from the range.

In the above example, a one-year SaaS subscription for Product A is sold at a 10% discount from the list price. So, if the list price for Product A at the time of sale is $4000, then the standalone price is computed to be $3600. RevRec used this standalone price to arrive at the allocated revenue as follows:

Standalone Selling Price of Product A / Total Standalone Selling Price * Total Sale Price

$3,600/$7,850 * $7,000 = $3,210.19

Simple Percent Net 

The Simple Percent Net policy allows you to configure the Standalone Price rule for sales where the standalone price of an Additional Performance Obligation is computed based on the pricing of the primary product. For example, when multiple product offerings are bundled together, the price at which say a support product is offered is based on the price of the primary license associated.

In the above example, the perpetual license for Product A is sold for $10,000 and the price for annual support is 20% of the license i.e. $2000.

Apportioned Percent Net 

The Apportioned Percent Net policy allows you to configure the Standalone Price rule for sales where the pricing of an Additional Performance Obligation is dependent on the pricing of the primary product(source). While it is similar to the simple percent net policy, the apportioned percent net takes into account the term of the source and target products to calculate the apportioned standalone price.

To use the Percent Net or Apportioned Percent Net Policy, you must provide a product code, family, type, or any custom attribute for all the products involved in your percent NET rule. The product code, family, type, or any custom attribute can be used to establish a relationship between products sold together in a given sales order.

For example, a 24-month Term license for Product A is sold for $20,000. Advanced Support is sold for the first three months and the SSP for advanced support is 25% of the license. While the standard first-year support is given away for free, the second-year standard support is sold for $2000. The apportioned standalone price for each item is computed based on their respective standalone price and terms.

Residual 

This policy enables you to use the traditional residual method. It is generally used in cases where the pricing of licenses is highly variable. The standalone price of the License in the below example is computed as the remaining unallocated transaction price for SSP from the Total Contract Value.