Yes. Extended product warranties and product maintenance contracts that are sold separately provide customers with a service and would represent a distinct performance obligation under ASC 606.

There are many examples of warranties depending on the type of product a consumer is buying. Some examples may include replacing a product such as a mobile phone if it does not the way it is advertised. A consumer may also receive free repair services where a product has been damaged during use.

Complain to the Better Business Bureau and to your state attorney general or consumer protection office. If all else fails, sue for damages. No one wants to go to small-claims court, but a warranty is a contract that holds up in court. For expensive products, look into contacting a consumer attorney.

A warranty is a contingent liability, so the party providing it should record a liability and warranty expense when it records the associated sale of goods or services. As the selling party incurs actual warranty costs, it charges them against the liability account.

Warranties Against Defects A warranty against defects is a promise that you make to fix any defects that occur in your products up to a certain time period. It is a promise made to the buyers that if the goods or services are defective, your business will: Repair or replace goods.

Example of Product Warranty Liability If the manufacturer sells 5,000 cars in the first month of its accounting year, the manufacturer must debit Warranty Expense for $5,000,000 (5,000 cars X $1,000)and will credit Warranty Liability for $5,000,000.

Some examples may include replacing a product such as a mobile phone if it does not the way it is advertised. A consumer may also receive free repair services where a product has been damaged during use. Some companies offer a money-back guarantee if consumers are not satisfied with a product.