What is the Standalone Selling Price in RevRec?
How to determine SSP rules in RevRec?
What is our standard SSP library in RevRec?
The SSP (Standalone Selling Price) 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 is most commonly understood as a that you can read more about on the AICPA site here. After identifying the contract, and 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.
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.
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.
RevRec supports determining the stand-alone selling price of each line item automatically within an order by using a rules-based approach. The rules use a matching approach to match the sale order SKU or product code (or a combination of other fields) to "look up" the rule in the SSP library for each line item.
A simple example best illustrates the concept, here we have ordered several line items but let's focus on the sold for $150K.
On seeing this product, RevRec 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.