ACCT 3520 Lecture Notes - Lecture 6: Telematics, Remote Diagnostics, The Monthly
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Identifying separate performance obligations step 2: performance obligation is a promise to provide a product or service to the customer, promise may be explicit, implicit or possibly based on customary business practice. The product or service must be distinct (the customer can benefit from it) If a performance obligation in a multi-obligation contract is distinct within the contract, then it should be accounted for separately. Example a: assume that genus motors sells an automobile to marquart auto dealers at a price that includes six months of telematics services such as navigation and remote diagnostics. These telematics services are regularly sold on a stand-alone basis by genus motors for a monthly fee. After the six- month period, the consumer can renew these services on a fee basis with genus motors. Example b: soft tech inc. sells customer-relationship software to lopez company.
