Performance obligation

A performance obligation is a contractual promise to transfer a distinct good or service to a customer; revenue is recognised when — or as — that obligation is satisfied, with price allocated by relative standalone selling value.

ByHoang TruongUpdated July 3, 2026

FrameworkIFRS 15

See it move

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A software contract priced at €12,000 bundles a licence and two years of support — two distinct performance obligations. Each is allocated its share of the price using relative standalone selling prices: €9,000 to the licence, €3,000 to the support. Revenue on the licence is recognised when control transfers; revenue on support is recognised over the two years as the service is delivered.

Where it fits

SubjectFinancial AccountingAdvancedTopicRevenue, Expenses & ProfitAdvancedTopicAccrual Accounting & RecognitionAdvanced

The formula

LaTeX

\text{Allocated Price}_i = \frac{\text{SSP}_i}{\sum_{j=1}^{n} \text{SSP}_j} \times \text{Transaction Price}

Variables

$S S P_{i}$: Standalone selling price of performance obligation i — the price at which the element would be sold independently (€)
$n$: Total number of performance obligations identified in the contract (count)
$T r an s a c t i o n P r i ce$: Total consideration in the contract (€)

Revenue is recognised when — or as — each performance obligation is satisfied, using the portion of the transaction price allocated to it on a relative standalone selling price basis.