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Establishing a stand-alone selling price under ASC 606

Helping you apply the new revenue recognition standard

Software revenue recognition has become increasingly complicated for many companies. Accordingly, for many software companies, applying the new standard, ASC 606, may be challenging. We provide answers to a broad range of questions that may arise regarding one especially complex area—establishing a stand-alone selling price (SSP).

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Establishing the stand-alone selling price as a range

Step four of the five-step process under ASC 606 requires entities to determine the SSP for each performance obligation in a contract so that the appropriate amount of revenue may be recognized. When pricing is steady and stand-alone sales of a good or service are common, the determination of the SSP is likely to be straightforward and involve little to no estimation. This exercise becomes more complex, however, when the pricing of a good or service varies from one transaction to another or when the stand-alone sales of a particular good or service are rare or nonexistent. In such cases, we believe entities may establish SSP as a range.

This Technology alert offers guidance and answers to questions on establishing the SSP as a range, determining the appropriate range, and allocation considerations.

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Estimating stand-alone selling price for term-based licenses and post-contract customer support

Estimating the SSP of performance obligations is one area of increased complexity and challenge for software companies. This is due to the fact that in some cases, typical observable data such as pricing from stand-alone sales or contractually stated prices may not exist for one or more performance obligations. We believe that in many such cases, reasonably available observable data other than stand-alone sales or contractually stated prices may nonetheless exist and may be used to determine the SSP.

For technology and software companies applying the new revenue recognition standard, this Technology alert offers a series of examples to illustrate this point, showing how the SSP may be estimated in various scenarios.

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Estimating stand-alone selling price for term-based licenses and post-contract customer support
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Residual approach to estimating stand-alone selling prices and allocating the transaction price when a value relationship exists

As discussed in previous Technology alerts, establishing the SSP is an area of increased complexity for software companies as they implement the requirements of the new revenue recognition standard.

Various factors contribute to this challenge such as:

  1. Highly variable or uncertain pricing, 
  2. Lack of stand-alone sales for one or more goods or services, and 
  3. Pricing interdependencies such that the selling price of one good or service is used to determine the selling price of another good or service in the same contract.

This Technology alert delves into the specifics of using a “value relationship” to determine the SSP when pricing is highly variable or uncertain but a pricing interdependency may nonetheless be identified between two or more goods and services.

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Get more detail on a residual approach to estimating stand-alone selling prices under the ASC 606 revenue recognition standard
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Deloitte Accounting Research Tool (DART)

Deloitte also provides the Deloitte Accounting Research Tool (DART), a comprehensive online library of accounting and financial disclosure literature to clients. Updated every business day, DART contains material from the FASB, Emerging Issues Task Force (EITF), American Institute of Certified Public Accountants (AICPA), Public Company Accounting Oversight Board (PCAOB), International Accounting Standards Board (IASB), and Securities and Exchange Commission (SEC), in addition to Deloitte’s own accounting manuals and other interpretive guidance and publications.

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Get in touch

Mohana Dissanayake
TMT Industry Leader
Audit & Assurance Partner
+1 408 704 4530

Sandie Kim
Senior Consultation Partner
Audit & Assurance
+1 415 783 4848

Jeff Jenkins
Senior Manager
Audit & Assurance
+1 415 783 7772


The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas; however, due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstances.