The standard defines a performance obligation as a promise in a contract with a customer to transfer a good or service to that customer. At contract inception, a company should assess the goods or services promised in a contract with a customer and should identify as a performance obligation, or multiple performance obligations, each promise to transfer either a distinct good or service, or a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.
Product sales could include resale rights, licenses, options related to future purchases (e.g., discounts, guaranteed availability), and construction, manufacturing, or developing an asset on behalf of a customer. Services could include discrete tasks, a standing service arrangement (e.g., tech support, software upgrades), and arranging for other parties to provide goods and services. When two or more goods and services collectively fulfill a commitment, the accounting treatment must consider them an integrated whole.