Under ASC 606, which option best describes a performance obligation?

Under ASC 606, which option best describes a performance obligation?

• A. Promises to transfer goods or services to a customer.
• B. The contract price.
• C. The payment method.
• D. The delivery date only.

Answer: (A)

Under ASC 606, a performance obligation is a promise in the contract to transfer a good or service to the customer. It becomes the unit of accounting for revenue and is satisfied when the customer gains control of the promised good or service, either at a point in time or over time. The contract price is just the consideration for fulfilling obligations, not the obligation itself; payment method is how the price is settled; and a delivery date alone indicates timing, not the promise to transfer.

Under ASC 606, a performance obligation is a promise in the contract to transfer a good or service to the customer. It becomes the unit of accounting for revenue and is satisfied when the customer gains control of the promised good or service, either at a point in time or over time. The contract price is just the consideration for fulfilling obligations, not the obligation itself; payment method is how the price is settled; and a delivery date alone indicates timing, not the promise to transfer.