Step 4: Allocate the Transaction Price
Allocating Revenue Among Performance Obligations
If a contract contains multiple performance obligations, the transaction price is allocated based on the relative standalone selling prices of each obligation.
If the customer pays $900, revenue is allocated proportionately: $720 to the software license and $180 to support services.
Tip
Always allocate discounts proportionally unless specific ASC 606 criteria permit another allocation.
Summary
Revenue is allocated based on the relative standalone selling prices of each promised good or service.