Standalone selling price (SSP)
DEFINITION
Standalone selling price (SSP) is the price at which a business would sell a good or service on its own, and it is the basis ASC 606 and IFRS 15 use for allocating a bundled contract's total price across its separate performance obligations.
TABLE OF CONTENTS
RELATED TERMS
Standalone selling price, or SSP, is the price at which a business would sell a promised good or service on its own to a customer. Under the revenue recognition standards ASC 606 and IFRS 15, SSP is the basis for splitting the total price of a bundled contract across the separate promises it contains.
Many subscription contracts bundle more than one thing: a software subscription with an onboarding service, or a platform fee with support and training. Revenue for each of those promises, called performance obligations, has to be recognized on its own terms and often on its own timeline. SSP is how the total contract price is allocated to each promise, in proportion to what each would sell for separately. For a subscription business, where a single contract often bundles a subscription with one-time services, getting that allocation right is what keeps each promise on its own correct recognition path.
Why standalone selling price matters for subscription businesses
SSP determines how much revenue lands on each part of a deal and when it can be recognized. If a bundle mixes a service delivered upfront with a subscription delivered over a year, the allocation between them changes the shape of recognized revenue across periods. Getting SSP right is therefore central to reporting revenue accurately and defensibly.
It also matters for audit and compliance. Because discounts on a bundle must be spread across obligations rather than assigned wherever convenient, a documented, consistent SSP protects a business when its revenue treatment is reviewed. When an item is never sold separately, the business has to estimate its SSP using an acceptable method, and that estimate needs to be supportable.
How to calculate standalone selling price
SSP is observable when the item is regularly sold on its own: it is simply that separate selling price. When an item is not sold separately, SSP must be estimated using an acceptable method, such as:
Adjusted market assessment: estimate what the market would pay.
Expected cost plus a margin: estimate the cost to deliver and add a reasonable margin.
Residual approach: in limited cases, back into SSP as the total price less the observable SSPs of the other items.
Once each obligation has an SSP, the transaction price is allocated in proportion:
Allocated price for an item = (SSP of the item / Sum of SSPs of all items) x Total transaction price
Illustrative worked example
The figures below are hypothetical and used only to show the allocation.
A contract sells for a total transaction price of $1,000 and contains two performance obligations:
Software subscription, SSP $900
Onboarding service, SSP $300
Sum of SSPs = 900 + 300 = $1,200
Allocate the $1,000 in proportion:
Software subscription: (900 / 1,200) x 1,000 = $750
Onboarding service: (300 / 1,200) x 1,000 = $250
Allocated total = 750 + 250 = $1,000, which reconciles to the transaction price. The $200 bundle discount (the difference between the $1,200 of standalone prices and the $1,000 charged) is spread across both obligations in proportion to their SSPs rather than assigned to one.
How to use standalone selling price
To apply SSP well:
Identify the separate performance obligations in each contract.
Assign an SSP to each, using the observable price where the item is sold separately and a documented estimate where it is not.
Allocate the transaction price in proportion to the SSPs, spreading any bundle discount across obligations.
Recognize each obligation's allocated revenue on its own pattern, whether at a point in time or over the service period.
Keep the SSP basis documented and consistent so the treatment holds up under audit.
Benefits and examples
A sound SSP practice supports:
Accurate revenue allocation across the promises in a bundled contract.
Correct timing, so upfront services and over-time subscriptions are recognized appropriately.
Defensible treatment of bundle discounts under ASC 606 and IFRS 15.
Cleaner audits, because allocations trace back to a documented basis.
As an illustration, the worked example above shows a $1,000 bundle split into $750 of subscription revenue recognized over the term and $250 of onboarding revenue recognized as that service is delivered. This example is illustrative and not tied to any specific result.
Frequently asked questions
What is standalone selling price? It is the price at which a business would sell a good or service separately to a customer. Under ASC 606 and IFRS 15 it is the basis for allocating a bundled contract's total price across its separate performance obligations.
What if an item is never sold separately? Then its SSP has to be estimated using an acceptable method, such as an adjusted market assessment, expected cost plus a margin, or in limited cases a residual approach. The estimate must be documented and supportable.
Why does SSP matter for revenue recognition? Because it decides how much of a bundle's price is assigned to each promise, which affects both how much revenue each part carries and when it can be recognized. It also governs how a bundle discount is spread across obligations.
How is a bundle discount handled with SSP? The discount is generally allocated across the performance obligations in proportion to their standalone selling prices, rather than assigned to a single item, so each obligation carries its share.
