Meteghan Electronics Ltd. (Meteghan) is a chain of consumer electronics stores. Meteghan sells a complete line of electronics products including audio, video, computers, and satellite radio, along with parts and service. Whenever a customer makes a purchase they are offered the opportunity to buy an extended warranty, which provides “free” parts and labour for three years beyond the one-year warranty provided by the manufacturer. The customer must purchase the extended warranty at the time the product is purchased. The warranty goes into effect when the manufacturer’s warranty ends.

Required

When should Meteghan recognize the revenue from its sale of extended warranties?
Explain your answer.