IFRS 15 Warranty – Meaning, Types and Accounting

IFRS 15 Warranty Concept STATES the Warranty Classification EITHER as ‘Service Type’ (a service in addition to the assurance), or ‘Assurance Type’ (the assurance that the product will function as specified).

IFRS 15 Warranty – Types and Accounting

In determining the ‘CLASSIFICATION’ of a Warranty, an Entity considers:

  • Whether It is Required by Law;
  • Length of the Warranty Coverage Period; AND
  • Nature of the Tasks that the Vendor Promises to Perform.
IFRS 15 Warranty
Service TypeAssurance Type
It provides ‘the Customer with a service in addition to the assurance that the product will function as specified‘.It provides ‘the Customer with the assurance that the product will function as specified‘.
This APPLIES regardless of whether the customer is able to purchase this warranty separately from the entity or not.Customer CANNOT purchase this warranty separately from the entity.
‘Additional Service’ Warranties are accounted for as Performance Obligation and allocated a portion of transaction price as per IFRS 15.‘Assurance’ Warranties are accounted for under IAS 37.

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