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An entity contracts with a customer to sell a piece of equipment and installation services. The...

An entity contracts with a customer to sell a piece of equipment and installation services. The equipment is operational without any customization or modification. The installation required is not complex and is capable of being performed by several alternative service providers.

Are the goods and services distinct? Please explain.

Business   Accounting   
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Answer #1

According to ASC 606, For this situation Good and Services are not distinct. Reasons for this as per ASC 606, Following are the few activities in which we can say goods and services are distinct :

  1. The good or service is capable of being distinct.
  2. The promise to transfer the good or service is distinct within the context of the contract.
  3. Highly interdependent or interrelated.
  4. Significant modification or customization.

So above all points are proved that this sitution which i mentioned in questions are not distinct good and services.

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