Key Attributes Used for the Automatic Calculation of OSSP

In modern Revenue Management systems, the Assignment Attributes play a critical role in the automatic calculation of Observed Standalone Selling Price (OSSP). These attributes define the rules and boundaries for when and how an OSSP is determined, ensuring compliance with ASC 606 / IFRS 15 while providing flexibility to adapt to business models.

Each item has price attributes that default from the Assignment Attributes, and these attributes govern how the application validates, establishes, and applies OSSP.

Key Attributes Used in OSSP Calculation

1. Minimum Standalone Sales

This attribute assesses whether the observed standalone selling price calculated by the system is valid, based on whether the minimum number of standalone sales is met.

• If sales are below the threshold defined in the SSP profile, the system flags the OSSP as Suggested Invalid.
• A revenue manager can then decide to either Establish or Not Establish the OSSP.

Example:
Suppose your company sells a cloud subscription priced at $1,000. In one quarter, only 3 standalone sales were made, while the minimum threshold is 10 sales. The system flags this OSSP as Suggested Invalid, since 3 sales are not statistically significant. The revenue manager can choose whether to establish it or ignore it.

2. Months Covered

Specifies the number of months that form the cover period for calculating OSSP.

Example:
A telecom company sets the cover period as 6 months. When calculating OSSP for its internet package, the system considers sales transactions from January–June instead of just one month. This smooths out seasonality effects (e.g., higher sales in December due to promotions).

3. Item Classification

Defines the category of the item, memo line, or performance obligation template.

Example:

• Hardware = “Product”
• Annual subscription = “Service”
• One-time setup fee = “Other”

When the system runs the Calculate OSSP process, it can separately evaluate “Service” items versus “Product” items. A $500 one-time setup fee doesn’t distort the standalone price of a $1,200 subscription.

4. SSP Tolerance Usage

Specifies the tolerance thresholds when validating OSSP. List values are Median, High or Low.

Example:

• Tolerance = ±10%
• Historical unit price for a software license = $10,000
• Observed selling price = $9,200

Since $9,200 falls within 10% of $10,000, the system accepts it as valid OSSP. If the price were $7,500, it would be flagged as out-of-tolerance.

Additional Attributes Commonly Used in the Industry

5. Effective Period

Defines the validity period of an OSSP.

Example:
A SaaS company sets OSSP for its premium package at $5,000, valid from Jan–Dec 2025. If a deal is signed in January 2026, that OSSP is no longer valid, and a new calculation is required.

6. Currency and Conversion Rules

Standardizes OSSP across multiple geographies.

Example:

• US observed price = $1,000
• UK observed price = £800
• If the company sets USD as the reporting currency, the £800 is converted to $1,040 (based on FX rate). Both sales are then pooled consistently for OSSP calculation.

7. Sales Channel or Region

Segregates OSSP calculations by geography or sales channel.

Example:
A laptop priced at $1,200 in North America might sell for $1,000 in Asia due to local pricing policies. By separating OSSP by region, the system avoids skewing the data and ensures each region has its own valid SSP.

8. Product/Service Bundling Rules

Determines whether OSSP should be calculated at a standalone level or bundle level.

Example:

• Hardware = $800
• Software license = $1,200
• Bundle (hardware + software) sold = $1,800

If bundling rules apply, OSSP is calculated at the bundle level ($1,800), not at the sum of standalone prices ($2,000). This reflects real customer behavior.

9. Statistical Method of Calculation

Defines whether OSSP is based on mean, median, or mode and whether outliers are eliminated.

Example:
For a training service:

• Observed sales = $4,500, $5,000, $5,100, $12,000
• Mean = $6,650 (distorted by $12,000 outlier)
• Median = $5,050 (better reflection of normal price)

The revenue manager might set the method as Median with outlier removal, leading to a more realistic OSSP.

Conclusion

The automatic calculation of OSSP relies on a combination of standard and extended assignment attributes. Core drivers like Minimum Standalone Sales, Months Covered, Item Classification, and SSP Tolerance Usage ensure compliance, while advanced attributes such as Effective Periods, Currency Rules, Channel Segmentation, Bundling Logic, and Statistical Methods provide precision and business adaptability.

By combining these rules with real-world sales examples, organizations can ensure that their OSSP framework not only meets compliance requirements but also reflects their true pricing strategy.