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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Q3 december 2017
from the answer for Q3(a)
“An entity accounts for a warranty as a cost accrual if it is not sold separately unless the warranty is to provide the customer with a service in addition to assurance that the product complies with agreed specifications.”
what does it mean by ‘cost accrual’?
“Thus the maintenance contract and additional warranty will be recognised over time and the sale of the wind turbine and free warranty will be recognised at a point in time”
what should i recognise the free warranty as? also, at what amount?
Hi,
We need to accrue for any costs associated with the future warranty being provided.
The warranty will be recognised based on the stand alone price, as if it were to be sold separately.
Thanks