Kodak 2008 Annual Report Download - page 79
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77
Warranty Costs
The Company has warranty obligations in connection with the sale of its products and equipment. The original warranty period is
generally one year or less. The costs incurred to provide for these warranty obligations are estimated and recorded as an accrued
liability at the time of sale. The Company estimates its warranty cost at the point of sale for a given product based on historical failure
rates and related costs to repair. The change in the Company's accrued warranty obligations balance, which is reflected in Accounts
payable and other current liabilities in the accompanying Consolidated Statement of Financial Position, was as follows:
(in millions)
Accrued warranty obligations as of December 31, 2006 $ 39
Actual warranty experience during 2007 (46)
2007 warranty provisions 51
Accrued warranty obligations as of December 31, 2007 $ 44
Actual warranty experience during 2008 (43)
2008 warranty provisions 64
Accrued warranty obligations as of December 31, 2008 $ 65
The Company also offers its customers extended warranty arrangements that are generally one year, but may range from three
months to three years after the original warranty period. The Company provides repair services and routine maintenance under
these arrangements. The Company has not separated the extended warranty revenues and costs from the routine maintenance
service revenues and costs, as it is not practicable to do so. Therefore, these revenues and costs have been aggregated in the
presentation below. The change in the Company's deferred revenue balance in relation to these extended warranty and routine
maintenance arrangements, which is reflected in Accounts payable and other current liabilities in the accompanying Consolidated
Statement of Financial Position, was as follows:
(in millions)
Deferred revenue as of December 31, 2006 $ 143
New extended warranty and maintenance arrangements in 2007 396
Recognition of extended warranty and maintenance
arrangement revenue in 2007 (391)
Deferred revenue as of December 31, 2007 $ 148
New extended warranty and maintenance arrangements in 2008 387
Recognition of extended warranty and maintenance
arrangement revenue in 2008 (382)
Deferred revenue as of December 31, 2008 $ 153
Costs incurred under these extended warranty and maintenance arrangements for the years ended December 31, 2008 and 2007
amounted to $175 million and $180 million, respectively.