What is a performance obligation, and how is it used to determine when revenue should be recognized?

What is a performance obligation, and how is it used to determine when revenue should be recognized?



A performance obligation is a promise to deliver a product or provide a service to a customer. The revenue recognition principle requires that companies recognize revenue in the accounting period in which the performance obligation is satisfied. In the case of services, revenue is recognized when the services are performed. In the case of selling a product, the performance obligation is met when the product is delivered


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