Canada Warranty Expiration

[LArsenault]

Hi,

I was just reading up on warranty accounting.

While the sales/revenue approach seems to earn the liability over time, irregardless of obligations occurring, the expense approach has me confused.

So I understand that everything is expensed in period and the un-honored obligations are sent to a liability at end-of-year, which is adjusted the following year as warranties are honored. But what if warranties expire before being honored? Do those obligations sit in the liability account forever? Is the warranty expense credited?

Thanks

 

[kirby]

Sit in liability acct forever. No
Warranty expense credited. Yes