What is Standalone Selling Price (SSP)?
Under IFRS 15 and ASC 606, when a contract has multiple performance obligations (e.g., software + implementation + support), the transaction price is allocated to each one based on relative standalone selling price (SSP) — the price the entity would charge if it sold that component separately.
The standards don't prescribe how to measure SSP — they identify three accepted methods. This tool helps determine which method is most applicable for a given situation.
Do you have 3 or more recent standalone sales of this component?
Do you have cost data for this component and a supportable margin benchmark?
Use your actual sales data.
You have the evidence auditors love most: real transactions. Collect prices from your 3+ standalone sales of this component, remove outliers and adjust for differences (volume discounts, contract terms, customer type), and calculate a representative price range or midpoint. That's your SSP.
Inputs You Need
- List of standalone sales prices (3+ transactions)
- Sale dates and contract terms for each
- Volume or tier differences to adjust for
- Customer segment (SMB vs. enterprise) if applicable
- Notes on any anomalies or non-arm's-length deals
Auditor Documentation
- Export of standalone sale transactions from CRM/ERP
- Signed order forms or SOWs for each reference sale
- Written methodology explaining adjustments made
- Range analysis showing final SSP is within the observed range
- Updated at least annually or when pricing changes materially
Adjusted Market Assessment Calculator
Enter your standalone sale prices. The calculator will compute the mean, median, and a suggested SSP range.
Build up from your costs.
No standalone sales data? No problem if you know your costs. Estimate the fully-loaded cost to deliver this component, then apply a margin percentage that's appropriate for this type of product. The result is your SSP. The margin must be supportable — tied to internal pricing policy, comparable product lines, or industry benchmarks — not just picked out of thin air.
Inputs You Need
- Fully-loaded cost per unit/contract (labor, hosting, support, overhead)
- Target gross margin % for this product type
- Source of margin benchmark (internal policy, comp set, analyst data)
- Cost allocation methodology documentation
- Margin range (low/mid/high) for sensitivity
Auditor Documentation
- Cost build-up schedule with line-item breakdown
- Written rationale for margin selection (not just a number)
- Comparable product margin data or internal pricing memo
- Sensitivity analysis showing SSP range at different margins
- Approval by Finance or Controller that cost/margin is reasonable
Expected Cost Plus Margin Calculator
Enter your fully-loaded unit cost and target margin to compute the SSP. Run multiple scenarios for your audit memo.
Subtract what you know.
When SSP for a component is highly variable or uncertain and neither of the other methods is available, you can use residual: take the total transaction price and subtract the SSPs of all other performance obligations. Whatever's left is the residual SSP for the uncertain component. This method is only permitted under specific conditions — and auditors will scrutinize it closely.
Inputs You Need
- Total transaction price (contract value)
- SSP for each other performance obligation (using AMA or ECPM)
- Evidence that this component has highly variable or uncertain SSP
- Documented rationale for why residual is the only feasible method
- Confirmation that residual amount is positive (not negative)
Auditor Documentation
- Full allocation schedule showing all components and their SSPs
- Support for each other component's SSP (AMA or ECPM workpapers)
- Written assertion explaining high variability or uncertainty
- Evidence this component is sold at widely varying prices
- Review by technical accounting team (Big 4 will ask for this)
Documentation warning: Auditors view residual as a last resort. Without a strong written rationale, expect pushback. If you're using residual for a meaningful revenue stream (>10% of contract value), have your technical accounting team sign off. Some Big 4 teams will require you to demonstrate you genuinely tried AMA and ECPM first.
Residual Approach Calculator
Enter the total transaction price and the known SSPs for all other performance obligations. The residual is your SSP for the uncertain component.
More ClearRevenue tools
SSP is Step 4 of the 5-step framework. These tools cover the full process.