Revenue – ifrs 15 handbook

10.2 Warranties
Overview
Under the standard, an entity accounts for a warranty (or part of a warranty) as a 
performance obligation if the warranty is distinct, including:
– the customer has an option to purchase the warranty separately; or 
– additional services are provided as part of the warranty. 
Otherwise, warranties are accounted for under the provisions standard.
10.2.1 
Applying guidance on warranties
IFRS 15.B29
Under the standard, a warranty is considered a performance obligation if it is distinct 
under the Step 2 criteria (see 
Chapter 2
). If the customer has an option to purchase 
the good or service with or without the warranty, then the warranty is a distinct 
service. If the warranty includes a service beyond assuring that the good complies 
with agreed specifications, then it is distinct.
IFRS 15.B29–B30, IAS 37
When a warranty is not sold separately, the warranty or a portion of it may still be 
a performance obligation if it provides the customer with a service in addition to 
the assurance that the product complies with agreed specifications. A warranty 
that covers only a product’s compliance with agreed specifications (an ‘assurance 
warranty’) is accounted for under the provisions standard. For further discussion of 
how to distinguish between an assurance- and service-type warranty, see 
10.2.2
.
IFRS 15.B29
If the warranty – or part of it – is considered to be a performance obligation, then 
the entity allocates a portion of the transaction price to the service performance 
obligation by applying the requirements in Step 4 of the model (see 
Chapter 4
).
IFRS 15.B32
If an entity provides a warranty that includes both an assurance element and a 
service element and the entity cannot reasonably account for them separately, then 
it accounts for both of the warranties together as a single performance obligation.
IFRS 15.B33, IAS 37
A legal requirement to pay compensation or other damages if products 
cause damage is not a performance obligation and is accounted for under the 
provisions standard.

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