New Warranty Accounting Standards Codification (ASC)

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time. For manufactures of any product from food to medicine to vehicles, they must create items that are safe to use. This is not only necessary to long term brand value and company success, but it is required by law. Perfection is the goal; however product failure and defects always occur, especially in advanced products such as vehicles. According to the statics, we found that Ford used to face the serious lawsuit with their tires; Toyota lost a fortune by recalling of their defected vehicles. (MotorTrend, 2011) For the multinational companies, it will be necessary for them to set up the contingency account to manage the crisis whenever possible. It will be tremendous amount of loss when they find themselves facing the charges. Contingency…show more content…
The warranty policy was established by FASB, which specifies the range from guarantees of leases, loans to stock price and letters of credit (Week, 2013). With the times goes by, the FASB replaces all of the old warranty policy with a single Accounting Standards Codification (ASC). In this new policy, it supersedes the original rules and specifies every detail of preparing the information related to warranty. (Week, New Warranty Accounting Standards, 2013) The definition of contingency under ASC Topic 450-10-20 of FASB states that an existing condition, situation, or set of circumstances involving uncertainty as to possible gain (gain contingency) or loss (loss contingency) to an entity that is ultimately resolved when one or more future events occur or fail to occur (Financial Accounting Standards Board, 2009). Not all the uncertain situations are considered as contingencies; there are several situations that are not contingencies, such
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