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True or false: A quality-assurance warranty is a separate performance obligation.

User Dinei
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Final answer:

A standard quality-assurance warranty is not generally considered a separate performance obligation for revenue recognition purposes; it's seen as part of the product's existing obligations.

Step-by-step explanation:

True or false: A quality-assurance warranty is a separate performance obligation.

This question relates to the recognition of performance obligations in accordance with revenue recognition standards such as ASC 606 or IFRS 15. Generally, a quality-assurance warranty is not considered a separate performance obligation because it is not a distinct good or service that the customer has the option to purchase separately. Instead, it is a guarantee that the product will function as specified in the contract; hence it is part of the existing performance obligation related to the product.

A warranty could be considered a separate performance obligation if it provides an additional service, such as a maintenance service that goes beyond assuring the existing quality or functionality assured by the standard warranty.

The answer to the student's question is false; a standard quality-assurance warranty is generally not considered a separate performance obligation in the context of revenue recognition.

User Ahmad Maleki
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