Categorize Conditional Field Warranty For Free

If customers have an option to purchase a warranty separately from the goods themselves, this is accounted for separately. If the warranty is part of the overall package, if it simply provides an assurance of compliance with agreed upon specifications, it is not accounted for separately.

Warranty Obligations means all liabilities and obligations arising out of or relating to the repair, rework, replacement or return of, or any claim for breach of warranty in respect of or refund of the purchase price of, any Business Products.

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.

Sale of product alongwith standard warranty will be single performance obligation. Provision for expected warranty costs will be made in ance with Ind AS 37. Additional warranty is in nature of service type warranty and will be a separate performance obligation.

Warranty revenue recognition: Types of Warranties On the other hand, service warranties are separate performance obligations because the seller provides distinct services beyond guaranteeing that the product will function as specified.

A warranty is a service-type warranty if the customer has the option to purchase it separately or if it provides a service to the customer beyond fixing defects existing at the time of sale. Service-type warranties would be accounted for as a separate performance obligation.

An assurance-type warranty guarantees the product will perform as promised and is not a performance obligation. A service-type warranty provides an additional service to the customer and is a separate performance obligation.

Example ? Assurance type warranties Manufacturer A sells laptop computers with a 12-month warranty which assures that the laptops will work as intended for 12 months. The warranty is not sold separately.