Step 2: Identify Performance Obligations
What Is a Performance Obligation?
A performance obligation is a promise to transfer a distinct good or service to the customer. Contracts may contain one or multiple performance obligations.
A good or service is distinct if the customer can benefit from it on its own and it is separately identifiable from other promises in the contract.
Tip
Ask whether the customer can benefit from each promised good or service independently.
Summary
Performance obligations represent the individual promises that determine how revenue will be recognized.