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Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

RLA STANDARDS COMMITTEE WEBINAR. LEADERSHIP CHAIRPERSON Ron Lembke University of Nevada. CO-CHAIRPERSON Ken Jacobsen Connexus. Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor. Standards Update: Warranty Accounting Standards by Eric Arnum Editor Warranty Week.

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Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

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  1. RLA STANDARDS COMMITTEE WEBINAR LEADERSHIP CHAIRPERSONRon LembkeUniversity of Nevada CO-CHAIRPERSONKen JacobsenConnexus Today’s Presentation is;Warranty Accounting Standardsby Eric ArnumEditor

  2. Standards Update: Warranty Accounting Standardsby Eric ArnumEditorWarranty Week STANDARDS COMMITTEE WEBINAR

  3. Warranty & Service Contract Cash Flow • Manufacturer’s Warranty: • $24.0 billion in claims paid by manufacturers, 2012 • Service Contracts: • $34.7 billion in premiums paid by consumers, 2012 • Total Cash Flow: • $58.7 billion changes hands in 2012 STANDARDS COMMITTEE WEBINAR

  4. Manufacturer’s Warranty ExpensesClaims Paid by U.S. Manufacturers, 2003-2012 WEBINAR Source: Warranty Week

  5. U.S. Service Contract MarketPremiums Paid by U.S. Consumers, 2003-2013 WEBINAR Source: Warranty Week estimates

  6. FASB Accounting Standards Codification • Out with the old • For manufacturer’s warranty: • FASB Interpretation Number 45 (Fin 45) "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others -- an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34" • For service contracts: • Technical Bulletin Number 90-1, "Accounting for Separately Priced Extended Warranty and Product Maintenance Contract" WEBINAR Source: Warranty Week estimates

  7. FASB Accounting Standards Codification • In with the new • For manufacturer’s warranty: • ASC Topic 460 – Guarantees • For service contracts: • ASC Topic 605 - Revenue Recognition WEBINAR Source: Warranty Week estimates

  8. WEBINAR Source: Warranty Week estimates

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  11. Example of an ASC 460-10-50-8b Methodology Disclosure from the HP Annual Report: WEBINAR Source: Warranty Week estimates

  12. Example of an ASC 460-10-50-8c Tabular Disclosure from the HP Annual Report: WEBINAR Source: Warranty Week estimates

  13. Hewlett-Packard Co.Warranty Claims & Accruals, 2003-2013 Accrual Rate (%) Quarterly Claims ($ Mil) Claims Rate (%) WEBINAR Source: Warranty Week from SEC data

  14. WEBINAR Source: Warranty Week estimates

  15. Eric Arnum, Editor Warranty Week 10520 66th Road Forest Hills NY 11375-2179 USA +1 (718) 896-0367http://www.warrantyweek.com earnum@warrantyweek.com WEBINAR Source: Warranty Week estimates

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