What is a stand-alone selling price?
The price at which the company would sell a promised good or service separately to a customer. The best evidence is an observable price from separate sales in similar circumstances. A list price may help, but it is not automatically the stand-alone selling price if the company routinely sells at a discount to it.
How is it estimated without an observable price?
| Method | How it works | Example |
|---|---|---|
| Adjusted market assessment | Look at what customers in the market would pay, including competitors' prices adjusted for differences | A new service similar to rivals' offerings |
| Expected cost plus a margin | Forecast the cost of providing the item and add an appropriate margin | A bespoke installation service |
| Residual approach | Total price less the observable stand-alone prices of the other items | A licence sold at widely varying prices, with no stable stand-alone price |
The residual approach is allowed only if the selling price is highly variable or uncertain, for example because the company sells the item to different customers at a broad range of prices or has not yet set a price for it.
A worked example: a software bundle
A company sells a package of a software licence, two years of support and training for CU 80,000. Sold separately, the items would cost:
| Obligation | Stand-alone selling price (CU) | Share | Allocated price (CU) |
|---|---|---|---|
| Software licence | 60,000 | 66.7% | 53,333 |
| Two years of support | 20,000 | 22.2% | 17,778 |
| Training | 10,000 | 11.1% | 8,889 |
| Total | 90,000 | 100% | 80,000 |
The customer receives a discount of CU 10,000, which is shared across the three items in proportion to their stand-alone prices. The licence revenue of CU 53,333 is recognised when the customer can use the software, because it is a right to use (see licences); support revenue of CU 17,778 is spread over two years; training revenue of CU 8,889 is recognised when the training is delivered. Enter your own prices in the Revenue allocation calculator (Excel) to get the allocation and the month-by-month schedule.
An example of the residual approach
Suppose the same company sells its licence at prices ranging from CU 30,000 to CU 90,000 depending on the customer, so it has no reliable stand-alone price for the licence alone, while support and training have stable prices of CU 20,000 and CU 10,000. For the CU 80,000 bundle, the licence receives the residual: CU 80,000 less CU 30,000 = CU 50,000. Support and training keep their full stand-alone prices, so the whole discount ends up in the licence. That is why the residual approach is restricted to prices that are genuinely variable or uncertain.
When can a discount go to only some items?
All three of these must apply: the company regularly sells each item, or each bundle of items, on its own; it regularly sells a bundle of some of those items at a discount; and that discount is substantially the same as the discount in the contract. Then the discount is allocated to the items in that bundle only.
How is variable consideration allocated?
Usually across all obligations, like the rest of the price. It is allocated entirely to one obligation, or to one distinct good or service within a series, if the variable payment relates specifically to the company's efforts to satisfy that obligation and the result is consistent with the allocation objective. A bonus for finishing one phase of a project early is an example. See variable consideration.
What if the price changes later?
Changes in the transaction price after inception are allocated on the same basis as at inception. Stand-alone selling prices are not re-estimated, and amounts allocated to obligations already satisfied are recognised as revenue, or a reduction of revenue, immediately.
Common mistakes
- Using list prices as stand-alone selling prices when the company always discounts them.
- Using the residual approach for items that do have a stable price.
- Allocating the whole discount to the item the sales team discounted, without meeting the three conditions.
Need help applying the standards?
Our Chartered Accountants help finance teams and students apply IFRS and US GAAP to real transactions.
Questions people ask
How is the transaction price allocated under IFRS 15?
In proportion to the stand-alone selling price of each performance obligation.
What methods can be used to estimate a stand-alone selling price?
Adjusted market assessment, expected cost plus a margin, and in limited circumstances the residual approach.
When can the residual approach be used?
Only when the stand-alone selling price is highly variable or uncertain.
How is a bundle discount allocated?
Across all performance obligations in proportion to their stand-alone selling prices, unless strict conditions show it relates to only some of them.
Sources
Every fee, date and rule on this page was taken from these official and primary sources.
Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.
Related guides
More in IFRS 15
This guide is general information. It is not tax or legal advice for your situation.