Which statement about warranties is correct?
A)Warranties sold separately are accounted for under IAS37.
B)Warranties sold separately are accounted for under IAS18.
C)Warranties are financial liabilities and accounted for at fair value.
D)Expected value uses a weighted average of possible outcomes.

Question

Quizplus · Accepted Answer

Warranties sold separately are treated as a separate transaction and accounted for under IAS 18, which covers revenue recognition. Option A is incorrect because IAS 37 deals with provisions, contingent liabilities, and contingent assets. Option C is incorrect because warranties are not financial liabilities, but rather a guarantee of quality or performance. Option D is incorrect because expected value uses the probability of each outcome, not a weighted average.

Which Statement About Warranties Is Correct