---
sidebar_position: 2
title: Performance Obligations (POBs) & Carve-Outs
description: Identifying distinct performance obligations, bundling, carve-outs, and material rights under ASC 606-10-25-14.
keywords:
  - performance obligations
  - POBs
  - carve-outs
  - material rights
---

# Performance Obligations (POBs) & Carve-Outs

**Performance Obligations (POBs) in GAAPx** are the distinct accounting units of revenue recognition. Under ASC 606 Step 2, GAAPx evaluates whether contract promises are distinct within the context of the agreement or should be combined.

:::info SCREENSHOT PLACEHOLDER: POB Decomposition View
**Location in App**: `App > Revenue > [Contract ID] > Performance Obligations`  
**Visual Description**: Line item breakdown showing bundled commercial contracts split into distinct POB units with separate recognition rules.  
**Recommended Dimensions**: `1200 x 675`  
:::

---

## Evaluating Distinct Goods & Services

Under ASC 606-10-25-14, a good or service is distinct if:
1. **Capable of being distinct**: The customer can benefit from the good or service either on its own or together with other readily available resources.
2. **Distinct within the context of the contract**: The promise to transfer the good or service is separately identifiable from other promises in the contract.

---

## Common SaaS POB Scenarios

* **SaaS Subscription + Implementation**: If implementation does not significantly customize or modify the cloud software, it is treated as a separate POB recognized over the implementation period.
* **Discounted Future Renewal Options**: A contract offering a future renewal at a below-market rate creates a **Material Right (POB)**, requiring an upfront revenue carve-out deferred until the renewal period.