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Under the FASB's Revenue from Contracts with Customers (Topic 606), a performance obligation is defined as the company's contractual promise to transfer a good or
Under the FASB's Revenue from Contracts with Customers (Topic 606), a performance obligation is defined as the company's contractual promise to transfer a good or service to the customer. If the contract involves transferring more than one good or service to the customer, the company needs to account for each promised good or service as a separate performance obligation. The company recognizes revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). DAF.com, a US-based online retailing conglomerate, reports the following in footnotes to its 2021 financial statements. We seek to be Earth's most customer-centric company. We serve consumers through our online and physical stores and focus on selection, price, and convenience. We offer programs that enable sellers to grow their businesses, sell their products in our stores, and fulfil orders through us, and programs that allow authors, musicians, filmmakers, Twitch streamers, skill and app developers, and others to publish and sell content. We also manufacture and sell electronic devices. In addition, we offer a membership program that includes unlimited free shipping on over 100 million items, access to unlimited streaming of thousands of movies and TV episodes, and other benefits. We provide advertising services to sellers, vendors, publishers, authors, and others through programs such as sponsored ads, display, and video advertising. Required: Referring to FASB's Topic 606 on performance obligation, for each of the following revenue streams of DAF.com, list the nature of the performance obligation and when DAF would recognize revenue for that performance obligation. i. Online sale of merchandise owned by third parties ii. Sale of an electronic device iii. Collecting cash for the membership iv. Sale of media content or apps available for download V. Sale of advertising services
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