Question
Implied performance obligation: Pre- and post-sale incentives Carmaker N has a historical practice of offering free maintenance services e.g. oil changes and tire rotation for
Implied performance obligation: Pre- and post-sale incentives Carmaker N has a historical practice of offering free maintenance services e.g. oil changes and tire rotation for two years to the end customers of dealers who buy its vehicles. However, the two years free maintenance is not explicitly stated in the contract with its dealers, but it is typically stated in Ns advertisements for the vehicles. Therefore, the maintenance is treated as a separate performance obligation in the sale of the vehicle to the dealer. Revenue from the sale of the vehicle is recognized when control of the vehicle is transferred to the dealer. Revenue from the maintenance services is recognized as the maintenance services are provided to the retail customer. Would the free maintenance be a separate performance obligation in the sale of the vehicle to the dealer, explain your response in two sentences or less?
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