Step 2: Identify the performance obligations 

1. Promises to provide goods and services are performance obligations when the goods and services are distinct. 

2. Definition of distinct.

   •  Capable of being distinct: The customer could use the good or service on its own or in combination with other goods or services it could obtain elsewhere. 

   • Separately identifiable from other goods or services in the contract: The promises to transfer goods and services are distinct in the context of the contract, because the seller is promising to provide goods and services individually as opposed to promising to provide a combined good or service for which the individual goods or services are inputs. 

Step 3: Determine the transaction price

•  Transaction price: the amount the seller expects to be entitled to receive from the customer in exchange for providing goods or services.

Step 4: Allocate the transaction price to each performance obligation 

• Stand-alone selling price: the amount at which the good or service is sold separately under similar circumstances. Summary of fundamental issues related to recognizing revenue