Question

Which of the following is typically treated as a separate performance obligation?

a) Sales discounts
b) Administrative expenses
c) Additional goods or services
d) General and administrative costs

Answer 1

In revenue recognition, 'Additional goods or services' is typically treated as a separate performance obligation if they are distinct.

Step-by-step explanation:

The question pertains to the identification of performance obligations in a contract, specifically in the context of revenue recognition standards such as those outlined by the Financial Accounting Standards Board (FASB) or the International Financial Reporting Standards (IFRS).

Among the options listed, c) Additional goods or services is typically treated as a separate performance obligation if they are distinct. A performance obligation is a promise in a contract with a customer to transfer goods or services that are distinct.

Sales discounts, administrative expenses, and general and administrative costs are normally accounting adjustments or expenses that don't represent promises to deliver goods or services to customers and hence, are not treated as performance obligations.