Serie 3 - Identification of Performance Obligations According to PSAK 72
- PSAK 72 stipulates that after identifying the contract with the customer (the first step), the second step is to identify the performance obligations. A performance obligation is defined as an explicit or implicit promise in the contract to transfer goods or services (or a series of goods/services that meet certain criteria) to the customer. This promise can be in the form of physical goods, services, rights, or other assets delivered to the customer.
According to Paragraph 22 of PSAK 72, an entity must identify all performance obligations in the contract by analyzing the promises made. Not all promises are considered separate performance obligations; only distinct ones are recognized individually. The purpose of this identification is to break the contract down into smaller accounting units, allowing for timely revenue recognition and compliance with the transfer of control.
Criteria for Identifying Distinct Performance Obligations
A good or service is considered distinct if it meets both of the following criteria (Paragraph 27 of PSAK 72):
- 1. The customer can benefit from the good or service either alone or in combination with other generally available goods/services.
This means the good or service is not simply an input component for another, but rather has intrinsic value to the customer. For example, software that can be used on its own is considered distinct, while a component that is only useful when assembled with another might not be.
2. The promise to transfer the good or service is distinct in the context of the contract.
This is evaluated based on the principle of principal (principal vs. agent) and dependency: If the integration of the good or service with others is significant enough that the customer cannot separate them (highly interdependent or highly interrelated), it is considered a single performance obligation. Factors considered include:
a. Does the entity significantly integrate the goods/services to fulfill the single promise?
b. Does one good or service significantly modify or adapt another?
c. Are the series of goods or services similar in nature and transferred in a similar pattern? (If so, it can be considered a single performance obligation (Paragraph 35).
- If the promise is not distinct, it is combined into a single performance obligation. Furthermore, PSAK 72 regulates that a series of distinct goods or services is considered a single obligation if it meets the criteria of uniform and proportional output (e.g., monthly maintenance services).
- This identification process is judgment-based, requiring professional judgment based on the facts and circumstances of the contract. If the contract is modified, the identification of the performance obligation is reevaluated.
Example 1: Sales Contract with Additional Services (Multiple Distinct Performance Obligations)
PT DEF signs a contract with a customer to sell computer equipment for Rp20 million, including software installation (Rp2 million) and a one-year warranty (Rp3 million). The total contract price is Rp25 million.
- a. Analysis:
Computer equipment: Distinct because the customer can use it independently (criterion 1 met), and is not dependent on other services (criterion 2 met). Software installation: Distinct because it is a standard service that can be performed by another party, and the customer receives a standalone benefit (e.g., the software can be reinstalled).
One-year warranty: Distinct because it is a separate promise to repair if defective, which can be purchased separately in the marketplace.
- b. Result
Three separate performance obligations. Revenue is allocated based on relative standalone prices (e.g., Rp20 million for the device recognized upon delivery, Rp2 million for the installation upon completion, and Rp3 million for the warranty recognized over time over one year).
Example 2: Integrated Construction Contract (Single Performance Obligation)
PT GHI contracts to build an office building for a customer, including architectural design, material procurement, and construction, for a total value of Rp500 billion.
- a. Analysis:
Design, materials, and construction: Not distinct because they are highly interdependent—the design modifies the materials, and they are all integrated to produce the complete building (criterion 2 is not fully met, although each could theoretically be beneficial independently). This is a single promise to transfer the customized construction asset.
- b. Result:
One single performance obligation. Revenue is recognized over time based on construction progress, not broken down by phase.
