SSP, Unit SSP, Total SSP, Relative SSP, and Extended SSP in Step 4 Allocation

Executive Summary

Under ASC 606 and IFRS 15, Step 4 – Allocate the Transaction Price is deceptively simple in wording but highly nuanced in execution. Practitioners frequently encounter multiple SSP-related terms—Standalone Selling Price (SSP), Unit SSP, Extended SSP, Total SSP, and Relative SSP—often introduced by revenue systems, auditors, or implementation discussions.

While the standards explicitly define SSP and require allocation based on relative standalone selling prices, additional terms arise from the need to operationalize the guidance consistently across complex, multi-line, and quantity-based contracts.

This whitepaper clarifies the meaning, purpose, and interaction of these terms, explains how they are used in Step 4 allocation, and expands the discussion to include additional SSP values and percentages commonly used in practice.

1. Introduction: Why SSP Terminology Creates Confusion

ASC 606 and IFRS 15 formally define Standalone Selling Price and require allocation based on relative standalone selling prices. However, revenue systems and implementation frameworks introduce additional derived values—such as Extended SSP, Total SSP, or allocation percentages—to operationalize the standard at scale.

As a result, professionals often ask:

• Are SSP, Unit SSP, Extended SSP, and Relative SSP different prices?
• Which value actually drives revenue allocation?
• Are there other SSP-related values that matter from an audit or system perspective?

This paper answers those questions in a structured, narrative-driven manner.

2. Standalone Selling Price (SSP)

Definition and Purpose

Standalone Selling Price (SSP) is defined as:

The price at which an entity would sell a promised good or service separately to a customer.

SSP is a foundational input, not an allocation result. It represents the entity’s pricing benchmark for each distinct performance obligation, independent of the specific contract being evaluated.

Key Characteristics

• Determined per performance obligation
• Independent of contract-level discounts or bundling
• May be observable or estimated
• Serves as the anchor for allocation, discount analysis, and audit review

Examples

• SaaS subscription sold standalone for $100,000 → SSP = $100,000
• Implementation service sold standalone for $50,000 → SSP = $50,000
• Support service never sold separately → SSP must be estimated

SSP Estimation Methods (ASC 606 / IFRS 15)

• Adjusted market assessment approach
• Expected cost plus margin approach
• Residual approach (permitted only in limited circumstances)

SSP determination is a judgmental accounting exercise and a frequent audit focus area.

3. Unit SSP

Definition

Unit SSP refers to the SSP expressed per unit of a good or service.

It is not a separate accounting concept under ASC 606 or IFRS 15, but a granular expression of SSP commonly used in subscription, usage-based, or quantity-driven contracts.

Relationship to SSP

• SSP may be defined per contract or per unit
• Unit SSP is simply SSP normalized to a single unit

Example

• SSP for 10 licenses = $100,000
• Unit SSP = $10,000 per license

Unit SSP is commonly used as the starting point for calculating Extended SSP when quantities apply.

4. Extended SSP

Definition and Role

Extended SSP is not an explicit accounting standard term. It is a derived, operational value commonly used in revenue systems.

Extended SSP = Unit SSP × Quantity

Extended SSP represents the total standalone value of a performance obligation line when quantities are involved.

Example

• Unit SSP = $1,000
• Quantity = 10
• Extended SSP = $10,000

Why Extended SSP Exists

Revenue allocation typically occurs at the line or obligation level, not at the per-unit level. Extended SSP enables:

• Quantity-based valuation
• Aggregation across contract lines
• Accurate proportional weighting prior to allocation

Extended SSP is typically calculated before relative SSP percentages are derived.

5. Total SSP (Aggregate SSP)

Definition

Total SSP represents:

The sum of SSPs or Extended SSPs for all performance obligations in a contract.

Although not explicitly named in the standards, Total SSP is an essential Step 4 construct.

Example

Performance Obligation	Extended SSP
SaaS Subscription	$100,000
Implementation	$50,000
Total SSP	$150,000

Total SSP forms the denominator for calculating Relative SSP.

6. Relative Standalone Selling Price (Relative SSP)

Definition

Relative SSP expresses the proportional relationship between a performance obligation’s SSP (or Extended SSP) and the Total SSP of the contract.

Formula:

Relative SSP % = SSP (or Extended SSP) ÷ Total SSP

Relative SSP is not a price; it is an allocation percentage.

Example

Performance Obligation	SSP	Relative SSP
SaaS Subscription	100,000	66.67%
Implementation	50,000	33.33%
Total	150,000	100%

If transaction price = $120,000:

• SaaS allocation = $80,000
• Implementation allocation = $40,000

Standard Alignment

ASC 606 and IFRS 15 explicitly require that:

The transaction price be allocated to each performance obligation based on relative standalone selling prices.

Relative SSP is therefore the default and governing allocation mechanism in Step 4.

7. How All SSP Concepts Work Together in Step 4

Allocation Flow

1. Determine SSP (often Unit SSP) for each performance obligation
2. Calculate Extended SSP where quantities apply
3. Sum all SSPs or Extended SSPs to derive Total SSP
4. Compute Relative SSP percentages
5. Allocate the transaction price using Relative SSP

Role Mapping

Term	Role in Step 4
SSP	Pricing benchmark per obligation
Unit SSP	Granular SSP input
Extended SSP	Line-level valuation
Total SSP	Allocation base
Relative SSP	Allocation mechanism

Only Relative SSP allocates revenue, but it depends on all preceding values.

8. Other SSP-Related Values and Percentages Used in Practice

Allocation Percentage

Often synonymous with Relative SSP.

SSP Low Point, High Point, and Midpoint

Used when SSP is determined from a range:

• SSP Low Point
• SSP High Point
• SSP Midpoint

These support governance, discount testing, and pricing controls.

Weighted SSP

Derived when multiple observable selling prices exist, weighted by frequency or volume.

Allocated Revenue Amount

Allocated Amount = Transaction Price × Relative SSP

This is an output, not an SSP.

9. Exceptions to Pure Relative SSP Allocation

ASC 606 and IFRS 15 allow deviations in limited cases:

Discount Allocated to Specific Performance Obligations

If the discount relates entirely to one or more obligations and evidence supports it.

Variable Consideration Allocated to Specific Performance Obligations

If it reflects underlying economics.

Even in these cases:

• SSP still exists
• Extended SSP may still be calculated
• Relative SSP remains the default framework for the remainder

10. Common Misconceptions

Misconception	Reality
SSP equals allocated revenue	Incorrect
Extended SSP is a GAAP term	Incorrect
Relative SSP is optional	Incorrect
Discounts are split evenly	Incorrect
Billing price equals SSP	Often incorrect

11. Auditor Perspective

Auditors typically focus on:

• SSP determination methodology
• Consistency of SSP application
• Support for SSP estimates
• Correct computation of Relative SSP
• Appropriate use of allocation exceptions

Extended SSP and Total SSP are reviewed as calculation artifacts, not judgment inputs.

Conclusion

In Step 4 of ASC 606 and IFRS 15:

• SSP is the foundation — the economic benchmark
• Unit SSP provides pricing granularity
• Extended SSP enables scalable, quantity-aware valuation
• Total SSP establishes the allocation base
• Relative SSP is the rule — the mechanism that allocates transaction price

Additional SSP-derived values support governance and system execution but do not replace the core principle.

A clear understanding of how these concepts interrelate ensures accurate revenue allocation, defensible audit positions, and consistent execution across complex customer contracts.