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Technology Alerts — Challenges Associated With Applying the New Revenue Standard

Establishing the Stand-Alone Selling Price as a Range (December 2018)

Technology Alert
December 14, 2018
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Technology Highlights — Challenges Associated With Applying the New Revenue Standard: Establishing the Stand-Alone Selling Price as a Range


FASB Accounting Standards Codification (ASC) Topic No. 606, Revenue From Contracts With Customers.
FASB Accounting Standards Update (ASU) No. 2014-09, Revenue From Contracts With Customers (Topic 606).
For additional discussion about establishing the SSP as a range, see the AICPA’s Audit and Accounting Guide Revenue Recognition.
Some entities may instead establish the SSP by using historical data on discounts off the list price. For example, if an entity consistently priced a particular good or service at 40 percent off the list price, the entity may establish the midpoint as 60 percent of the list price (100 percent less the 40 percent discount), assuming that a sufficient number of transactions were discounted within a reasonable range of that midpoint. This publication does not address (1) the use of a discount off the list price to establish the SSP range or (2) the determination of whether the use of historical discounting data is sufficient and appropriate for establishing the SSP
Some entities may instead apply a method similar to a bell-shaped curve approach to determine a single-point estimate of the SSP of a performance obligation (e.g., by using the midpoint within the distribution as the SSP). This publication addresses only circumstances in which the SSP is determined as a range.
The level of disaggregation may depend, in part, on an entity’s pricing policies and practices.