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Classification of Warranty Expense

accounting for warranty expenseI wanted to see if folks are booking warranty expense to COGS or SG&A. It seems we might have some leeway in regards to this, however, it seems that Dell, Apple and H&P book it to COGS (Ie as they discuss it impacting margin). I lean toward COGS making the most sense, however, curious to see how others are handling. Thank you.

Answers

Anonymous
(Director) |

I don't believe there is any definitive guidance on warranty expense classification in U.S. GAAP. I would think that if there is a deliverable element for warranties within a sales transaction that requires separate revenue recognition treatment, you might lean towards classifying the related expense as COGS as it impacts margin.

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