What are the Accounting Standards for Warranty Reserves?
Various accounting standards like GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) provide guidelines for warranty reserves. Under GAAP, companies must recognize a liability for warranty costs at the time of sale. IFRS also requires the recognition of a provision when the company has an obligation as a result of past events, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.