Our Warranty Policy contains guidelines for managing warranty accruals and reserves within your company. This policy includes a systematic approach to determining the rates for warranty accruals and the methodology for analyzing the sufficiency of warranty reserves allocated for customer service inventory and anticipated future product returns. This policy is applicable across all business units that sell products with warranties and maintain inventory for customer service repairs. The document details the procedures for calculating warranty reserves, which are based on historical data on product defects, repairs and industry trends. 

It also assigns responsibilities to the cost accounting department, such as developing warranty rates, validating shipments or billings, and updating failure and repair rates. Additionally, the policy stipulates quarterly reviews and adjustments by the corporate controller and CFO to ensure the adequacy of the warranty reserves. This document is crucial for ensuring financial accuracy and preparedness in handling product warranties, making it an essential tool for financial controllers, accountants and business unit managers involved in product sales and customer service.

Under this policy, cost accounting is responsible for: 

• Developing/calculating warranty rates for all products
• Validating the units shipped or the amount of billings each month by product family
• Updating annualized failure rates, warranty periods and repair rates by product family
• Booking the warranty provision accrual each quarter