Observable price
An observable price is the price at which an entity actually sells a good or service separately to similar customers in similar circumstances. It is the best evidence of standalone selling price. A contractually stated or list price may be the standalone selling price, but is not presumed to be.
Standard references
- ASC 606606-10-32-32
- IFRS 15paragraph 77
- Ind AS 115paragraph 77
Worked example
Illustrative: premium support was sold on its own 45 times in the last 12 months to mid-market customers, at $9,000 to $13,500.
- 80% of those sales fall between $10,800 and $12,200; the median is $11,500.
- List price is $15,000, but almost no customer pays it, so list price is not the SSP.
- Use $11,500 as the SSP point estimate, or $10,800–$12,200 as a range under a written policy.
Result: SSP supported by 45 observable standalone sales, not by the list price.
Illustrative figures for explanation only, not taken from a real contract.
Common mistakes
- Treating list price as observable evidence.
- Mixing customer classes, such as enterprise and SMB, in one dataset.
- Including sales that were part of bundles.
- Drawing conclusions from too few transactions.