Mars Marine produces outboard motors for a variety of recreational and commercial boating configurations. Martin Quint, the owner of Mars Marine, is planning to provide to any person purchasing a Mars motor a coupon entitling them to a 40% discount on a ten-year maintenance contract. However, Mars Marine has never offered such maintenance contracts before. As an accountant employed at First Bank, which is Mars Marine’s largest lender, you have voiced concern that this new idea could affect Mars Marine’s revenue recognition, potentially requiring that some of each sale be deferred and possibly putting the company in violation of earnings-based debt covenants as a result. “A sale is a sale!” Quint grumbled. “I don’t see why I can’t just recognize all the revenue for the sale of a motor when I sell the motor, and then I’ll cover the maintenance if I have to provide it in the future. Prove to me I can’t handle it that way!”

Required:
Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org) and select Basic View for free access. Determine the specific nine-digit Codification citation (XXX-XX-XX-XX) that indicates the authoritative support in the Codification for each of the following aspects relevant to Quint’s request.
1. One question is whether the coupon for the maintenance contract should even be considered a separate performance obligation. What Codification citation indicates the criteria for determining whether an option to purchase a maintenance contract constitutes a material right that gives rise to a performance obligation?
2. Assuming the maintenance contract is viewed as a separate performance obligation, what Codification citation indicates that the transaction price should be allocated to performance obligations based on their standalone selling prices?
3. Mars Marine has never offered this sort of maintenance contract before. What Codification citation indicates the approaches that it might use to estimate the standalone selling price of the maintenance contract?
4. Quint is likely to say that, even if some of a transaction price can be allocated to multiple performance obligations, the entire transaction price should be recognized as revenue at the time the motor is sold. What Codification citation indicates that the portion of the transaction price that is assigned to the maintenance contract should only be recognized as revenue when that performance obligation is satisfied?