The formulas
- Residual = total transaction price - sum of observable standalone selling prices of the other items
How it works
When one promised item has a highly variable or uncertain selling price, the residual approach assigns it whatever is left of the transaction price after the observable prices of the other items are deducted. It is an estimating technique, so its use is limited to specific conditions.
Check that the residual is reasonable. A residual of zero or near zero, or one far from your list price, means the method does not fit and another estimate should be used. Document why the selling price is highly variable or not yet established.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
When may I use it?
When the standalone selling price of the item is highly variable or has not been established. Read the standard before relying on it.
What if the residual is zero?
Use another estimating method, since a zero price is unlikely to depict a faithful allocation.
Does it replace relative allocation?
Not for items with observable prices. It supplies a price for the item that lacks one.
Formulas on this page are the standard definitions.
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.