• Profile photo of MikeLittle says

      In an exam situation, it’s always made pretty clear either by way of percentage probabilities or by way of note.

      If you are asking how it is done in practise, I have no idea. I can only guess that a combination of common sense and external confirmations would be needed

      Hope that helps

    • Profile photo of John Moffat says

      The reason is that it is virtually certain that they will have to pay for some warranty claims.
      (The only relevance of the 5% is that they would probably use this to estimate the amount needed for the provision)

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