Warranty given on products sold

Question

Do I have to recognize warranties given with the products being sold. My company sells electronic items with one year warranty. Is it required to take this warranties in to our books under IFRS? If so how to do it?

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Answer 1

IAS 37 provides for this type of scenarios. Warranties can cause additional expenses to the company on claims. Therefore a warranty provision has to be recognized in accounts. Warranty provision could be the best estimate and usually it can be decided based on past warranty claim analysis.