According to FASB ASC 606, a performance obligation exists when
A) A company receives the right to receive consideration
B) A contract is approved and signed
C) A company provides a distinct product or service
D) A company provides interdependent product or service

Question

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According to FASB ASC 606, a performance obligation exists when a company provides a distinct product or service. A distinct good or service is defined as one that can be separately identified from other goods or services within the contract and is capable of being delivered to the customer. This means that the customer can benefit from the good or service on its own or with other resources. The other options (A, B, and D) are not correct because they do not fully capture the concept of a performance obligation as defined by ASC 606. For example, the mere approval and signing of a contract (B) does not by itself create a performance obligation unless the contract includes a promise to deliver a distinct good or service. Similarly, the right to receive consideration (A) is not sufficient to create a performance obligation unless there is a promise to deliver a good or service. Finally, interdependent goods or services (D) may be part of a performance obligation, but only if they are not capable of being delivered separately from each other.

According to FASB ASC 606, a Performance Obligation Exists When