Sales warranties – the Case: Example on recognising and measuring provisions
A manufacturer gives warranties at the time of sale to purchasers of its product. Under the terms of the contract for sale, the manufacturer undertakes to make good, by repair or replacement, manufacturing defects that become apparent within three years from the date of sale. On the basis of experience, it is probable (ie more likely than not) that there will be some claims under the warranties.
Considerations Sales warranties
Present obligation as a result of a past obligating event—the obligating event is the sale of the product with a warranty, which gives rise to a legal obligation. Sales warranties
An outflow of resources embodying economic benefits in settlement—probable … Read more