Generally, discounts are allocated to all performance obligations based on their relative standalone selling price (“SSP”). However, when there is objective evidence that the discount relates to one or more, but not all, performance obligations then the discount shall be allocated to fewer than all performance obligations, if certain criteria are met.
There are three criteria ALL of which must be met before the discount can be allocated to fewer than all performance obligations. In summary, those criteria are as follows:
As an option, the reporting entity can exclude taxes from consideration. If the reporting entity wants to include taxes, then additional analysis is required.
ASC 606-10-32-36 thru 32-37
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