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This chapter discusses customer options to acquire additional goods or services. Customer options to acquire additional goods or services include sales incentives, customer loyalty points, contract renewal options, and other discounts. Certain volume discounts are also a form of customer options. Management should assess each arrangement to determine if there are options embedded in the agreement, either explicit or implicit, and the accounting effect of any options identified.
Customer options are additional performance obligations in an arrangement if they provide the customer with a material right that it would not otherwise receive without entering into the arrangement. The customer is purchasing two things in the arrangement: the good or service originally purchased and the right to a free or discounted good or service in the future. The customer is effectively paying in advance for future goods or services.
Refunds, rebates, and other obligations to pay cash to a customer are not customer options. They affect measurement of the transaction price. Refer to RR 4 for information on measuring transaction price.
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