This free, guided checker walks your finance team through the key decision points for IAS 37 Warranty Provision Linked to IFRS 15 Revenue. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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Warranties may be explicit in contracts or implied by law, regulation, or customary business practice creating a constructive obligation under IAS 37.
No warranty provision workflow applies; assess any other IAS 37 obligations separately (IAS 37.14).
Official guidance: IFRS issued standards
IFRS 15.B28-B29 treats assurance-type warranties as IAS 37 provisions; service-type extended warranties sold separately or as optional add-ons are distinct performance obligations under IFRS 15.
Account for the service-type warranty as a distinct performance obligation with deferred revenue under IFRS 15, not IAS 37 (IFRS 15.B31).
Official guidance: IFRS issued standards
The obligation arises when the product is sold or delivered under statutory consumer protection or customary repair commitments, not when a future claim is filed.
No present obligation exists yet; reassess when the sale or delivery obligating event occurs (IAS 37.17).
Official guidance: IFRS issued standards
Assess the class of products sold together using historical claim rates, defect data, and legal requirements; remote obligations are not recognized.
Do not recognize a provision; disclose a contingent liability if an outflow is possible but not probable, unless remote (IAS 37.23; IAS 37.86).
Official guidance: IFRS issued standards
Use expected value for a large population of similar products; use most likely outcome adjusted for other outcomes for single major obligations; update estimates each reporting period.
Treat as a contingent liability and disclose it until measurement becomes reliable (IAS 37.26; IAS 37.86).
Official guidance: IFRS issued standards
Include expected repair, replacement, labour, and logistics costs net of expected salvage; exclude future operating costs and expected profit from warranty work unless IAS 37.47 applies.
Remeasure the provision to the best estimate using updated claim data and cost assumptions (IAS 37.36).
Official guidance: IFRS issued standards
Discount using a pre-tax rate reflecting current market assessment of the time value of money and risks specific to the liability; unwind discount in profit or loss.
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Official guidance: IFRS issued standards
Assurance-type warranty cost is recognized as expense with a corresponding provision when revenue is recognized, matching the obligation created by the sale.
Align the warranty provision recognition with revenue recognition for the related products (IFRS 15.B30; IAS 37.14).
Official guidance: IFRS issued standards
IAS 37.59 requires provision review at each reporting date and adjustment for changed estimates; unused amounts are reversed when the obligation is extinguished.
Update the provision rollforward for current claims experience and expiries before period-end close (IAS 37.59).
Official guidance: IFRS issued standards
Right-of-return refund liabilities and service-type warranty deferred revenue are IFRS 15 liabilities; assurance-type warranty provisions are IAS 37 provisions.
Recognize and disclose the warranty provision with supporting measurement and rollforward (IAS 37.84; IAS 37.85). Reclassify assurance-type warranty amounts from the IFRS 15 contract liability to an IAS 37 provision (IFRS 15.B28; IAS 1.54).
Official guidance: IFRS issued standards
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