FASB ASC 606 Introduces the Concept of a Performance Obligation

question 53

Essay

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.

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Definitions:

Auditory Information

Data or knowledge received and processed through the sense of hearing.

Pons

A structure in the hindbrain that acts as a neural relay center, facilitating the crossover of information between the left side of the body and the right side of the brain and vice versa. It is also involved in balance and in the processing of both visual and auditory information.

Pituitary Gland

A small endocrine gland located at the base of the brain that produces hormones regulating growth, metabolism, and reproductive functions.

Releasing Hormones

Hormones secreted by the hypothalamus that stimulate or inhibit the release of hormones from the anterior pituitary.