Question

Which of the following is considered a performance obligation?
A) A processing fee to obtain a bank loan
B) Extended warranties on electronic products
C) Quality-assurance warranties on electronic products
D) Up-front registration fees for a gym membership

Answer 1

Answer:

The answer is: B) Extended warranties on electronic products

Explanation:

A performance obligation is a promise to deliver a product or provide a service.

A quality assurance is not considered to be a performance obligation, but service type warranties (including extended warranties) are usually considered performance obligations.