NOTE 9—WARRANTY AND DEFERRED EXTENDED WARRANTY REVENUE
The Company records a liability for its standard limited warranties at the time of sale for the estimated costs that may be incurred. The liability for standard warranties is included in accrued and other current liabilities and other non-current liabilities in the Consolidated Statements of Financial Position.
- F-38 -
DENALI HOLDING INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Changes in the Company’s liabilities for standard limited warranties are presented in the following table for the periods indicated.
| Successor | Predecessor | |||||||||||||||
| Fiscal Year Ended January 29, 2016 |
Fiscal Year Ended January 30, 2015 |
October 29, 2013 through January 31, 2014 |
February 2, 2013 through October 28, 2013 |
|||||||||||||
| (in millions) | ||||||||||||||||
| Warranty liability: |
||||||||||||||||
| Warranty liability at beginning of period |
$ | 679 | $ | 774 | $ | — | $ | 762 | ||||||||
| Fair value realized through purchase accounting |
— | — | 822 | — | ||||||||||||
| Costs accrued for new warranty contracts and changes in estimates for pre-existing warranties (a) (b) |
754 | 860 | 225 | 775 | ||||||||||||
| Service obligations honored |
(859 | ) | (955 | ) | (273 | ) | (771 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Warranty liability at end of period |
$ | 574 | $ | 679 | $ | 774 | $ | 766 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Current portion |
$ | 381 | $ | 453 | $ | 496 | $ | 486 | ||||||||
| Non-current portion |
193 | 226 | 278 | 280 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Warranty liability at end of period |
$ | 574 | $ | 679 | $ | 774 | $ | 766 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | Changes in cost estimates related to pre-existing warranties are aggregated with accruals for new standard warranty contracts. The Company’s warranty liability process does not differentiate between estimates made for pre-existing warranties and new warranty obligations. |
| (b) | Includes the impact of foreign currency exchange rate fluctuations. |
Revenue from the sale of extended warranties is recognized over the term of the contract or when the service is completed, and the costs associated with these contracts are recognized as incurred. Deferred extended warranty revenue is included in deferred revenue in the Consolidated Statements of Financial Position.
Changes in the Company’s liabilities for deferred revenue related to extended warranties are presented in the following table for the periods indicated.
| Successor | Predecessor | |||||||||||||||
| Fiscal Year Ended January 29, 2016 |
Fiscal Year Ended January 30, 2015 |
October 29, 2013 through January 31, 2014 |
February 2, 2013 through October 28, 2013 |
|||||||||||||
| (in millions) | ||||||||||||||||
| Deferred extended warranty revenue: |
||||||||||||||||
| Deferred extended warranty revenue at beginning of period |
$ | 6,573 | $ | 5,686 | $ | — | $ | 7,048 | ||||||||
| Fair value recognized through purchase accounting |
— | — | 5,466 | — | ||||||||||||
| Revenue deferred for new extended warranties (a) |
4,252 | 4,370 | 983 | 2,955 | ||||||||||||
| Service revenue recognized |
(3,596 | ) | (3,483 | ) | (763 | ) | (3,034 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Deferred extended warranty revenue at end of period |
$ | 7,229 | $ | 6,573 | $ | 5,686 | $ | 6,969 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Current portion |
$ | 3,250 | $ | 2,958 | $ | 2,742 | $ | 3,334 | ||||||||
| Non-current portion |
3,979 | 3,615 | 2,944 | 3,635 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Deferred extended warranty revenue at end of period |
$ | 7,229 | $ | 6,573 | $ | 5,686 | $ | 6,969 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | Includes the impact of foreign currency exchange rate fluctuations. |
- F-39 -
DENALI HOLDING INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
