FASB ASC 606 introduces the concept of a performance obligation in recognizing revenue. Discuss:
a. A performance obligation is a promise in a contract to provide a product or service to a customer. This promise may be explicit, implicit, or possibly based on customary business practice.
a. How a performance obligation is defined under FASB ASC 606?
b. How companies determine if a performance obligation exists?
b. To determine whether a performance obligation exists, a company must determine whether the customer can benefit from the good or service on its own or together with other readily available resources.

Question

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The Answer of FASB ASC 606 introduces the concept of a performance obligation in recognizing revenue. Discuss:
a. A performance obligation is a promise in a contract to provide a product or service to a customer. This promise may be explicit, implicit, or possibly based on customary business practice.
a. How a performance obligation is defined under FASB ASC 606?
b. How companies determine if a performance obligation exists?
b. To determine whether a performance obligation exists, a company must determine whether the customer can benefit from the good or service on its own or together with other readily available resources.

FASB ASC 606 Introduces the Concept of a Performance Obligation