Separate Needed Field Warranty For Free
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Below is a list of the most common customer questions. If you can’t find an answer to your question, please don’t hesitate to reach out to us.
Is warranty a separate performance obligation?
Generally, assurance-type warranties are not considered a separate performance obligation. These types of warranties do not provide an additional good or service to the customer, because the selling entity has effectively provided a guarantee of quality and that the product will meet its agreed-upon specifications.
Is a warranty a performance obligation?
If a warranty, or a part of a warranty, provides a customer with a service in addition to the assurance that the product complies with agreed-upon specifications, the promised service is a performance obligation. Therefore, an entity should allocate the transaction price to the product and the service.
What is warranty obligation?
Warranty Obligations means all liabilities and obligations arising out of or relating to the repair, rework, replacement or return of, or any claim for breach of warranty in respect of or refund of the purchase price of, any Business Products.
What is a service type warranty?
Service-type warranties those are warranties that provide something additional to the mere assurance, for example they provide some extra services. These warranties give rise to a separate performance obligation, because they provide additional service to the customer, and they are accounted for under IFRS 15.
What is a performance obligation in accounting?
A performance obligation is a promise to provide a distinct good or service to a customer. This is the unit of account for applying the new revenue standard. Goods and services that aren't distinct are bundled together with other goods or services in a contract until a single performance obligation is achieved.
Is shipping a separate performance obligation?
Shipping is not a separate performance obligation when an entity controls the goods until they are unloaded. An entity recognizes revenue when it satisfies a performance obligation by transferring a promised good or service to a customer.
What is a separate performance obligation?
A performance obligation is a promise to provide a distinct good or service to a customer. When there are multiple promises in a contract, companies will need to determine whether those goods or services are distinct, and therefore separate performance obligations.
How is a performance obligation defined?
”An entity's performance obligation is a promise in a contract with a customer to transfer an asset (such as a good or a service) to that customer or to that customer's nominee as per the terms of the contract.”
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