Western Digital (WDC)

 

The Company records an accrual for estimated warranty costs when revenue is recognized. The Company generally warrants its products for periods of one to five years. The warranty provision considers estimated product failure rates and trends, estimated repair or replacement costs and estimated costs for customer compensatory claims related to product quality issues, if any. A statistical warranty tracking model is used to help with estimates and assists in exercising judgment in determining the underlying estimates. The statistical tracking model captures specific detail on hard drive reliability, such as factory test data, historical field return rates, and costs to repair by product type. If actual product return trends, costs to repair returned products or costs of customer compensatory claims differ significantly from estimates, future results of operations could be materially affected. Management’s judgment is subject to a greater degree of subjectivity with respect to newly introduced products because of limited field experience with those products upon which to base warranty estimates. Management reviews the warranty accrual quarterly for products shipped in prior periods and which are still under warranty. Any changes in the estimates underlying the accrual may result in adjustments that impact current period gross margin and income. Such changes are generally a result of differences between forecasted and actual return rate experience and costs to repair.

 

 

The Company records an accrual for estimated warranty costs when
revenue is recognized. The Company generally warrants its
products for periods of one to five years. The warranty
provision considers estimated product failure rates and trends,
estimated repair or replacement costs and estimated costs for
customer compensatory claims related to product quality issues,
if any. A statistical warranty tracking model is used to help
with estimates and assists in exercising judgment in determining
the underlying estimates. The statistical tracking model
captures specific detail on hard drive reliability, such as
factory test data, historical field return rates, and costs to
repair by product type. If actual product return trends, costs
to repair returned products or costs of customer compensatory
claims differ significantly from estimates, future results of
operations could be materially affected. Management’s
judgment is subject to a greater degree of subjectivity with
respect to newly introduced products because of limited field
experience with those products upon which to base warranty
estimates. Management reviews the warranty accrual quarterly for
products shipped in prior periods and which are still under
warranty. Any changes in the estimates underlying the accrual
may result in adjustments that impact current period gross
margin and income. Such changes are generally a result of
differences between forecasted and actual return rate experience
and costs to repair.

 

 

The Company records an accrual for estimated warranty costs when revenue is recognized. The Company generally warrants its products for a period of one to five years. The warranty provision considers estimated product failure rates and trends, estimated repair or replacement costs and estimated costs for customer compensatory claims related to product quality issues, if any. A statistical warranty tracking model is used to help with estimates and assists in exercising judgment in determining the underlying estimates. The statistical tracking model captures specific detail on hard drive reliability, such as factory test data, historical field return rates, and costs to repair by product type. If actual product return trends, costs to repair returned products or costs of customer compensatory claims differ significantly from estimates, future results of operations could be materially affected. Management’s judgment is subject to a greater degree of subjectivity with respect to newly introduced products because of limited field experience with those products upon which to base warranty estimates. Management reviews the warranty accrual quarterly for products shipped in prior periods and which are still under warranty. Any changes in the estimates underlying the accrual may result in adjustments that impact current period gross margin and income. Such changes are generally a result of differences between forecasted and actual return rate experience and costs to repair.

 

 

The Company records an accrual for estimated warranty costs as products are sold. Warranty covers costs of repair or replacement of the hard drive over the warranty period, which ranges from one to five years and is recorded in the accompanying balance sheet as current or long-term based upon when the expenditure is expected to occur. The Company has comprehensive processes with which to estimate accruals for warranty, which include specific detail on hard drives in the field by product type, historical field return rates and costs to repair. Return rate and repair cost estimates are reviewed quarterly and updated to reflect the impact of current results on prior expectations. Although the Company believes that it has the continued ability to reasonably estimate warranty reserves, unforeseeable changes could cause a material change in the Company’s warranty accrual estimate. Such a change would be recorded in the period in which it was identified.