Successful Wishes corporation contracts with a customer to license and install payroll application software. In addition to the software license. Successful Wishes Corporation will provide installation service as a part of this contract. The installation service could be performed by other entities because Sucessful Wishes does not customize the software How many performance obligations exist in this contract?
Performance obligation:
FASB provides the necessary guidance and defines the performance obligation as a promise to a customer to transfer distinct goods and services or a series of distinct goods and services. Distinct goods and services offer benefits on their own or with the combination of other customer’s resources.
In this case, there exists only one performance obligation as the company is required to provide the customer the necessary licenses and install the software as a part of contract. The customer can get this software customized according to his requirements from a third-party service provider as the company is not in the business of customizing the software according to customer requirements.
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