1. Identify the performance obligations. Kyber-Comm operates in the telecommunications and media industry. As a network operator, Kyber-Comm enters into a standard 24-month contract with its customer to provide mobile network services, including a free handset that is gives to the customer at contract inception. The customer can benefit from the handset together with resources that are readily available to them, in other words, the usage of the handset is not dependent on the network connection services and the customer could sign up with another network service provider. Kyber-Comm has also historically provided free handset maintenance services for the duration of the contract to its customers, however, Kyber-Comm does not explicitly promise maintenance services during negotiations with the customers, nor does the final contract between itself and the customers specify terms or conditions for those services. Choose one answer.

a. The handset together with the network services from one performance obligation.

b. The contract comprises three separate performance obligations: transfer of the handset, provision of network connection services, and implicit provision of maintenance services.

c. As the provision of the maintenance service is not explicitly stated in the contract with the customer, it is not a separate performance obligation.

d. The whole contract consists of one performance obligation

e. As the handset is given for free, it is not a separate performance obligation.

2. Distinct goods and services. Kyber-Comm enters into a standard contract with a customer to transfer a post-production 3D conversion software license, provide initial training on usage of the software, provide software updates and onsite/telephone technic support for a two-year period. The initial training, software updates and technic support are optional services that are not embedded in the license, however, the future updates are expected to arise frequently and are essential to the functionality of the software because the software cannot continue to be used by the customer without the future updates. The training services are generic to most of the software licensed by Kyber-Comm. It has been identified four possible types of goods and services as follows: 1. The software license 2. Initial training services 3. Software updates and 4. Technic support. Which of the following is correct?

a. The entire contract consists of a single performance obligation.

b. The training services, software updated and technic support form one performance obligation as they are not embedded in the license and can be acquired separately from the license.

c. The software license and software updates form one performance obligation.

d. The software license and initial training services form one performance obligation.

e. Each of the four types of goods and/or services identified above is a separate performance obligation.

3. Identify performance obligations with discount offer. Kyber-Comm is planning to enter into a special category of contract with customers for the provision of internet services for a 2-year period for $250 per month. As part of the contract, Kyber-Comm will provide that particular customer with a 60% discount coupon if the customer subscribes to its pay-TV channel in the following month. Kyber-Comm has placed advertisements in the local newspaper offering a free 10% discount on any new subscriptions to its pay-TV channel as part of its seasonal promotion in the following month. Which of the following is INCORRECT?

a. The whole contract constitutes a single performance obligation.

b. The monthly payments of $250 include a prepayment for future services as the customer is entitled to a 60% discount that he would not otherwise have had had he not entered into the original contract.

c. The material right evidenced by the extra 50% discount should be identified as a separate performance obligations.

d. Because all customers will receive a 10% discount on new subscriptions during the following month, the discount that provides the customer with a material right that he would not receive without entering into the contract is only the 50% incremental discount.