A company is required to estimate the [...] resulting from its warranties, to recognize an estimated warranty expense in the period of the sale.
Answer
amount of future expenses
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Open it sible approach would be for a company to wait until actual expenses are incurred under the warranty and to reflect the expense at that time. However, this would not result in a matching of the expense with the associated revenue.
<span>Under the matching principle, a company is required to estimate the amount of future expenses resulting from its warranties, to recognize an estimated warranty expense in the period of the sale, and to update the expense as indicated by experience over the life of the warranty.
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Original toplevel document
4.2. Issues in Expense Recognition receivables, or the amount of receivables overdue by a specific amount of time. The company records its estimate of uncollectible amounts as an expense on the income statement, not as a direct reduction of revenues.
<span>4.2.2. Warranties
At times, companies offer warranties on the products they sell. If the product proves deficient in some respect that is covered under the terms of the warranty, the company will incur an expense to repair or replace the product. At the time of sale, the company does not know the amount of future expenses it will incur in connection with its warranties. One possible approach would be for a company to wait until actual expenses are incurred under the warranty and to reflect the expense at that time. However, this would not result in a matching of the expense with the associated revenue.
Under the matching principle, a company is required to estimate the amount of future expenses resulting from its warranties, to recognize an estimated warranty expense in the period of the sale, and to update the expense as indicated by experience over the life of the warranty.
4.2.3. Depreciation and Amortisation
Companies commonly incur costs to obtain long-lived assets. Long-lived assets are assets expected to provi
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