An option for a customer to purchase additional goods at a discount from list price is only a performance obligation if the discount is a material right that the customer would not receive otherwise.

Question

Quizplus · Accepted Answer

According to ASC 606, a material right is a promise to provide a future discount or free good or service to a customer that it would not receive without entering into the contract. If the discount offered is a material right that the customer would not receive otherwise, then it is considered a separate performance obligation. However, if the discount offered is not a material right, then it is not considered a separate performance obligation.

An Option for a Customer to Purchase Additional Goods at a Discount