IFRS 15 defines a performance obligation as a promise in a contract with a customer to transfer a good or service to the customer. Each promised good or service (or a bundle of goods or services) is treated as a performance obligation if it is distinct.

A performance obligation is considered distinct if both the following criteria are met:

1. Capable of being distinct: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer.
2. Separately identifiable: The promise to transfer the good or service to the customer is separate from other promises in the contract. This could be the case when the good or service is not highly dependent on, or highly interrelated with, other goods or services promised in the contract.

If a promised good or service is not distinct, an entity shall combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct. The bundle then becomes the performance obligation.

This approach helps to ensure that revenue is recognized in a manner that depicts the transfer of goods or services that the customer expects to receive and pay for, and not merely the provision of a potential benefit to the customer.