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a contract contains certain promises to transfer goods or services to a customer these promises are called performance obligations think of performance obligations as the unit of account used to recognize revenue ase topic 606 introduces a new model related to recognizing revenue step two requires entities to identify performance obligations that are distinct weamp;#39;ll cover that term later in this module but for now letamp;#39;s look at a quick example letamp;#39;s assume a company sells a machine to a customer in addition to the machine the contract stipulates that the company will deliver the machine and it at the customeramp;#39;s location finally the contract requires the company to provide ongoing maintenance of the machine over a three-year period these promises are bundled into a single contract price step two provides us guidance as to whether these promises meet the definition of a performance obligation and therefore need to be separated in subsequent steps weamp;#39
