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in this video were going to discuss the accounting for service type warranties recall that there are two types of warranties to customers the first one is that the product meets agreed upon specifications in the contract at the time the product is sold in other words it works as expected and that type of warranty is included in the sales price and is referred to as an assurance type warranty theres not a separate performance obligation associated with assurance type warranties the second type of warranty is not included in the sales price and is referred to as a service type warranty it is recorded as a separate performance obligation this is the type of warranty where you pay an additional 59.99 to have the warranty extended for two years beyond the original 90-day warranty period amazon often off often uses square trade for its extended warranties theres other companies out there such as assurion any money that the company receives for this assurance type warrant or service type