QUESTION 15 Illustration 15 A cable company provides television services for a fixed rate fee of $ 800 per month for a period of 3 years. Cable services is satisfied overtime because customer consumes and receives benefit from services as it is provided i.e. Customer generally benefits each day that they have access to cable service. Determine how many performance obligations does the cable company have.
Solution
Cable Company determines that each increment of its services e.g. day or month is a distinct performance obligation because customer benefits from that period of services on its own. Additionally, each increment of service is separately identifiable from those preceding and following it i.e. one service period does not significantly affect, modify or customize another. Therefore, it can be concluded that its contract with customer is a single performance obligation to provide three years of cable service because each of the distinct increments of service is satisfied over time. Also, Cable Company uses the same measure of progress to recognize revenue on its cable television service regardless of the contract’s time period.
