Criteria to Be Distinct
- The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct).
- The entity’s promise to transfer the good or service to the customer is separately identi able from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract).
To be a performance obligation, a promised good or service must be both (1) capable of being distinct and (2) distinct within the context of the contract. Early in the development of the new revenue standard, the FASB and IASB thought that goods and services should have a distinct function. Entities asked for further explanation of what that meant. Accordingly, the boards provided the guidance in ASC 606-10- 25-19(a) and (b) (paragraph 27(a) and (b) of IFRS 15).
