Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 2 - Conceptual Framework for Financial Reporting - Review and Practice - Questions - Page 62: 20


A performance obligation can be viewed to as a promise to deliver or rather provide a service to a customer. Normally, the revenue recognition principle requires revenue in the accounting period in which the performance obligation is satisfied.

Work Step by Step

As you probably know, the most effective date of highly anticipated revenue recognition standards is when an enterprise's satisfaction of a performance obligation occurs when or as the goods or services are transferred to the customer. In the case of a service revenue is recognized when the service is performed while in the place of a product revenue is recognized when the product is delivered.
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