today’s presentation is; warranty accounting standards by eric arnum editor

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Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor RLA STANDARDS COMMITTEE WEBINAR LEADERSHIP CHAIRPERSON Ron Lembke University of Nevada CO-CHAIRPERSON Ken Jacobsen Connexus

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RLA STANDARDS COMMITTEE WEBINAR. LEADERSHIP CHAIRPERSON Ron Lembke University of Nevada. CO-CHAIRPERSON Ken Jacobsen Connexus. Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor. Standards Update: Warranty Accounting Standards by Eric Arnum Editor Warranty Week. - PowerPoint PPT Presentation

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Page 1: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

Today’s Presentation is;Warranty Accounting Standards

by Eric ArnumEditor

RLA STANDARDS COMMITTEE WEBINAR

LEADERSHIP CHAIRPERSONRon LembkeUniversity of Nevada

CO-CHAIRPERSONKen JacobsenConnexus

Page 2: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

Standards Update: Warranty Accounting Standards

by Eric ArnumEditor

Warranty Week

STANDARDS COMMITTEE WEBINAR

Page 3: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

Warranty & Service Contract Cash Flow

– Manufacturer’s Warranty:• $24.0 billion in claims paid by manufacturers, 2012

– Service Contracts:• $34.7 billion in premiums paid by consumers, 2012

– Total Cash Flow:• $58.7 billion changes hands in 2012

STANDARDS COMMITTEE WEBINAR

Page 4: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Other

Appliance

CE

Phone

PC

Auto

Source: Warranty Week

Manufacturer’s Warranty ExpensesClaims Paid by U.S. Manufacturers, 2003-2012

WEBINAR

Page 5: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

HomeWarranty

Appliance

CE

Mobile

PC

VSC

Source: Warranty Week estimates

U.S. Service Contract MarketPremiums Paid by U.S. Consumers, 2003-2013

WEBINAR

Page 6: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

FASB Accounting Standards Codification• Out with the old

– For manufacturer’s warranty:• FASB Interpretation Number 45 (Fin 45) "Guarantor's

Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others -- an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34"

– For service contracts:• Technical Bulletin Number 90-1, "Accounting for

Separately Priced Extended Warranty and Product Maintenance Contract"

WEBINAR Source: Warranty Week estimates

Page 7: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

FASB Accounting Standards Codification

• In with the new

– For manufacturer’s warranty:

• ASC Topic 460 – Guarantees

– For service contracts:

• ASC Topic 605 - Revenue Recognition

WEBINAR Source: Warranty Week estimates

Page 8: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

WEBINAR Source: Warranty Week estimates

Page 9: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

WEBINAR Source: Warranty Week estimates

Page 10: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

WEBINAR Source: Warranty Week estimates

Page 11: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

Example of an ASC 460-10-50-8b Methodology Disclosure from the HP Annual Report:

WEBINAR Source: Warranty Week estimates

Page 12: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

Example of an ASC 460-10-50-8c Tabular Disclosure from the HP Annual Report:

WEBINAR Source: Warranty Week estimates

Page 13: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

Hewlett-Packard Co.Warranty Claims & Accruals, 2003-2013

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Quarterly Claims ($ Mil) Claims Rate (%)Accrual Rate (%)

Source: Warranty Week from SEC dataWEBINAR

Page 14: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor
Page 15: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

WEBINAR Source: Warranty Week estimates

Page 16: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor
Page 17: Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor

Eric Arnum, EditorWarranty Week10520 66th RoadForest Hills NY 11375-2179USA

+1 (718) 896-0367http://[email protected]

WEBINAR Source: Warranty Week estimates