Services
1. The Core Definition of a Performance Obligation
A performance obligation is a promise in a contract with a customer to transfer either a distinct good or service, or a series of distinct goods or services that are substantially the same and follow the same pattern of transfer.
2. Criteria for Determining “Distinct” Status
A good or service promised to a customer is distinct if both of the following criteria are met:
  • Capable of being distinct: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer.
  • Distinct within the context of the contract: The promise to transfer the good or service is separately identifiable from other promises in the contract.

3. Bundled Arrangements and Integration Risks
An item is not separately identifiable (and must be bundled with other items into a single performance obligation) if:
  • The entity provides a significant service of integrating the item with other goods/services into a combined output.
  • The item significantly modifies or customizes another good or service in the contract.
  • The item is highly interdependent or highly interrelated with other contract components.

 
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