Allocate the Transaction Price to the Separate Performance Obligations
The proposed revenue model continues use of the relative selling price method that was introduced in Chapter 2—Multiple-Element Arrangements. However, the new model will not incorporate the hierarchy of stand-alone value that is required to be used under current accounting guidance. The hierarchy to determine stand-alone value as the basis for allocating amounts to separate units of accounting is as follows:
Vendor-specific objective evidence (VSOE)—the price at which a product or service is sold separately.
Third-party evidence (TPE)—the price at which a similar product or service is sold by other companies.
Best estimate of selling price (BESP)—companies’ estimate of what ...