BC277 A consequence of allocating the transaction price on a relative stand-alone selling price basis is that any discount in the contract is allocated proportionately to each of the performance obligations in the contract. Some respondents noted that this would not always faithfully depict the amount of consideration to which an entity is entitled for satisfying a particular performance obligation. For example, those respondents noted that the allocation of the discount could result in a loss on one part of the contract although the contract as a whole may be profitable (for example, the contract contains both a high-margin item and a low-margin item). They suggested that the boards should permit an entity to allocate the discount in a contract using one of the following alternatives:
(a) a management approach, in which an entity would assess which promised good or service is priced at a discount to its stand-alone selling price.
(b) a residual approach, in which any
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