69.3k views
1 vote
Options for additional goods or services are considered performance obligations if they provide a material right to the customer that the customer

1 Answer

3 votes

Final answer:

Options for additional goods or services constitute performance obligations if they give the customer a material right, such as an exclusive discount, that wouldn't be available without the contract.

Step-by-step explanation:

When considering options for additional goods or services in a contract, these options are counted as performance obligations if they grant the customer a material right that they would not have received otherwise. A material right might be something like a discount or a benefit that the customer wouldn’t be entitled to unless the contract was in place. For example, if a customer purchases a phone with a contract that includes a discounted price on future purchases of phone accessories, this discounted price is a material right because it provides significant future benefits that the customer would not have access to without entering into the contract.

User Manigandan
by
7.8k points