Overview of Standalone Selling Prices
The standalone selling price is the price that a vendor expects to receive if the promised good or service is sold on its own to a customer.
The best evidence of a standalone selling price is the observable price of a good or service when you sell that good or service separately in similar circumstances and to similar customers. A contractually stated price or a list price for a good or service may be, but isn't presumed to be, the standalone selling price of that good or service.
The standalone selling price is used to allocate the contract value (transaction price) to each performance obligation. The intent in allocating the transaction price to the individual performance obligations is to assign each performance obligation an amount of consideration that the entity would expect to be entitled to for fulfilling that portion of the contract and for the product discount being given. The standalone selling price isn't the valuation of the transaction. It's the basis of the allocation.
A discount exists if the sum of the standalone selling prices of the goods or services in the contract exceeds the consideration payable by the customer. A discount is allocated on a proportionate basis to all performance obligations in the contract, unless there is observable evidence that the discount is attributable to only some performance obligations in a contract. This might be the case if a contract is for the supply of three goods, and two of these are frequently sold together at a discount from the total of the two standalone selling prices.
Revenue Management can't allocate pricing on customer contracts without standalone selling prices.
If a standalone selling price isn't directly observable, an entity must estimate it. When estimating a standalone selling price, an entity:
- Considers all information (including market conditions, entity-specific factors, and information about the customer or class of customer) that’s reasonably available to the entity.
- Maximizes the use of observable inputs.
- Applies estimation methods consistently in similar circumstances.
The ASC 606 standard includes a list of suitable methods for estimating the standalone selling price of a good or service including, but not limited to, the following:
- Adjusted market assessment approach. An entity could evaluate the market in which it sells goods or services and estimate the price that a customer in that market would be willing to pay for those goods or services.
- Expected cost plus a margin approach. An entity could forecast its expected costs of satisfying a performance obligation and then add an appropriate margin for that good or service.
- Residual approach. An entity may estimate the standalone selling price by reference to the total transaction price minus the sum of the observable standalone selling prices of other goods or services promised in the contract.
- The entity sells the same good or service to different customers (at or near the same time) for a broad range of amounts (that is, the selling price is highly variable because a representative standalone selling price isn’t discernible from past transactions or other observable evidence).
- The entity hasn’t yet established a price for that good or service, and the good or service hasn’t previously been sold on a standalone basis (that is, the selling price is uncertain).
Revenue Management provides these standalone selling price representation types for defining and assigning standalone selling prices:
- Percentage of Base Unit Price
- Discount Percentage of Unit List Price
- Gross Margin
- Unit Price
You manage and assign your standalone selling prices using one of these methods:
- Upload standalone selling prices using the Create Standalone Selling Prices spreadsheet, which you access from the Edit Standalone Selling Price Profile page.
- Manage the standalone selling prices externally and provide the standalone selling price on the source document line using the Unit SSP attribute on the Revenue Basis Data Import template.
- Run the Calculate Observed Standalone Selling Prices process to calculate standalone selling prices based on a set of standalone sales for a defined range of periods.
- Use the residual approach to estimate standalone selling prices.
The Revenue Basis Data Import template provides these fields, which are used to derive standalone selling price values based on the representation type:
- Unit list price: Used in calculation to derive the Discount Percentage of Unit List Price SSP value.
- Base price: Used in calculation to derive the Percentage of Base Unit Price SSP value.
- Cost Amount: Used in calculation to derive the Gross Margin SSP value.
You also have the option to define your standalone selling prices using a single reference currency, which means that all your prices are defined in one currency within Revenue Management. This eliminates the need to define standalone selling prices for each currency you do business in. When the source document line is in a currency other than the reference currency, the reference currency standalone selling price is converted into the source document line currency before it's assigned.
For example, if the reference currency is USD and the source document line is in CAD, the USD reference currency standalone selling price is converted into CAD.
- It determines whether the standalone selling price was imported with the source document line.
- If the standalone selling price isn't imported with the source document line, the application attempts to assign it from the standalone selling prices repository based on the representation type and the combination of pricing dimension, currency, effective period, and unit of measure.
- If there's no standalone selling price in the repository, the application displays an error stating that the standalone selling price is missing for the line.
When using the out-of-the-box integration with other Oracle applications such as Subscription Management, the Unit SSP is populated with the unit list price.