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FASB Accounting Standards Codification Case Summary

254 Words2 Pages

ABC offers separately priced extended warranties for appliances sold that are non-refundable and have no limits to the potential cost of honoring the warranty. Although ABC does track warranty profits and losses by appliance type, assume that no analysis has been performed to determine the rates at which cost are incurred throughout the warranty period. Assuming that manufacturer warranties provide coverage for the appliance for 1 year from the date of purchase, when should revenues and expenses of such warranties be recognized? FASB Accounting Standards Codification (ASC) topic 605-20-25-3 (Revenue Recognition) states that in regard to extended warranties “revenue shall be recognized in income over the period in which the seller is obligated

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