WARRANTIES

Question 1

Which are the types of warranties?

Answer 1

1. Warranties that provide a customer with the assurance that the product will function as intended because it complies with agreed-upon specifications. Goods will be replaced or repaired at cost of the vendor
2. warranty that provides the customer with a service in addition to the assurance that the product complies with agreed-upon specifications
3. warranties that give the customer the right to compensation (a refund instead of a replacement or repair)

Question 2

How are the different types of warranties accounted?

Answer 2

1. Warranties that the product is function are accounted for in accordance with the guidance on product warranties included within IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
2. Warranties that provides service in addition are accounted for in accordance with IFRS 15. Variable consideration guidance applies.
3. warranties that give the customer the right to compensation are within the scope of IFRS 15 and subject to the variable consideration guidance