BC363 In some contracts, an entity transfers a good to a customer and also grants the customer the right to return it. The boards decided that, conceptually, a contract with a right of return includes at least two performance obligations - a performance obligation to provide the good to the customer and a performance obligation for the return right service, which is a stand‑ready obligation to accept the goods returned by the customer during the return period.
BC364 In relation to performance obligations to provide customers with goods, the boards decided that, in effect, an entity has made an uncertain number of sales. This is because it is only after the return right expires that the entity will know with certainty how many sales it has made (ie how many sales did not fail). Consequently, the boards decided that an entity should not recognise revenue for the sales that are expected to fail as a result of customers exercising their return rights. Instead, the enti
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