Question
Sotoma Pty Ltd gives warranties at the time of sale to purchasers of its products (computer chips). Under the terms of the contract for sale,
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Sotoma Pty Ltd gives warranties at the time of sale to purchasers of its products (computer chips). Under the terms of the contract for sale, the manufacturer undertakes to remedy, by repair or replacement, manufacturing defects that become apparent within three years from the date of sale. As this is the first year that the warranty has been available, there is no data from the firm to indicate whether there will be claims under the warranties. However, industry research suggests that it is likely that such claims will be forthcoming. It would be much appreciated if you could kindly advise the accounting team whether the company should recognise a provision. business letter
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