Print PageCUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. PRODUCT WARRANTY LIABILITY
A summary of the activity in our warranty liability account, which includes warranty provisions and payments, changes in our estimates for pre-existing warranties and changes in our deferred revenue balances associated with extended warranty programs is as follows:
| December 31, | ||||||
| 2007 | 2006 | |||||
| Millions | ||||||
| Balance, beginning of year | $ | 652 | $ | 581 | ||
| Provision for warranties issued | 403 | 332 | ||||
| Deferred revenue on extended warranty contracts sold | 66 | 75 | ||||
| Payments | (328 | ) | (292 | ) | ||
| Amortization of deferred revenue on extended warranty contracts . | (51 | ) | (37 | ) | ||
| Changes in estimates for pre-existing warranties | 2 | (14 | ) | |||
| Foreign currency translation | 5 | 7 | ||||
| Balance, end of year | $ | 749 | $ | 652 | ||
The current portion of our warranty balance is included in ‘‘Other accrued expenses’’ and the remaining balance is included in ‘‘Other liabilities and deferred revenue’’ on our Consolidated Balance Sheets. The amount of deferred revenue related to extended warranty programs at December 31, 2007 and 2006, was $180 million and $166 million, respectively.
The accompanying notes are an integral part of the Consolidated Financial Statements.