Answer
Performance obligation is a commitment to act in an agreed way or manner. For example, commitment to deliver products that have been bought. The performance obligation exists where there is a mutually beneficial relationship between parties relating to an exchange of value.
Work Step by Step
For example, when the customer makes a purchase, the performance obligation relates to supply of the purchased item from the seller. The performance obligation exists in such a scenario because we are exchanging something of value to each other.
