Chapter 3, Problem 3E

Identifying Performance Obligations and Timing Revenue Recognition

Sirius XM Holdings Inc. sells a dash-top satellite radio receiver and one-year subscription for a total price of $80. By purchasing this deal, the subscriber is entitled to receive hardware (i.e., the radio), a software update that is automatically downloaded every second month to the radio, and continuous music service for one year from the date the hardware is delivered.

Required:

Identify the performance obligation(s) in this contract, and indicate whether the revenue should be recognized at a point in time (“when”) or over time (“as”) for each identified performance obligation.