Provision for Contract Warranty/Maintenance
Code: 2163
👁 Views: 106
Account Information
| Financial Statement | Statement of Financial Position |
| Normal Balance | Credit |
Definition
Provision for expected future costs of warranty or maintenance for projects after delivery to the customer (usually during the warranty period). Recognized upon project completion or per contract terms under IAS 37.
📐 IFRS vs US GAAP Accounting Treatment
IFRS
IAS 37
Provisions, Contingent Liabilities and Assets
US GAAP
ASC 450
Contingencies
❓ Frequently Asked Questions
Q: What is the provision for contract warranty/maintenance?
A: A provision covering expected future costs of maintenance or warranty for projects after delivery to the customer, recognized upon project completion.
Q: How is the maintenance provision created?
A: A percentage of contract revenue (e.g., 1-5%) is estimated based on past experience, then the entry: Dr. Warranty Provision Expense, Cr. Provision for Contract Warranty/Maintenance.