1. Today’s Presentation is; Warranty Accounting Standards by Eric Arnum Editor RLA STANDARDS COMMITTEE WEBINAR LEADERSHIP CHAIRPERSON Ron Lembke University of Nevada CO-CHAIRPERSON Ken Jacobsen Connexus

2. Standards Update: Warranty Accounting Standards by Eric Arnum Editor Warranty Week STANDARDS COMMITTEE WEBINAR

3. Warranty & Service Contract Cash Flow –Manufacturer’s Warranty: $24.0 billion in claims paid by manufacturers, 2012 –Service Contracts: $34.7 billion in premiums paid by consumers, 2012 –Total Cash Flow: $58.7 billion changes hands in 2012 STANDARDS COMMITTEE WEBINAR

4. Source: Warranty Week Manufacturer’s Warranty Expenses Claims Paid by U.S. Manufacturers, 2003-2012 WEBINAR

5. Source: Warranty Week estimates U.S. Service Contract Market Premiums Paid by U.S. Consumers, 2003-2013 WEBINAR

6. FASB Accounting Standards Codification Out with the old –For manufacturer’s warranty: FASB Interpretation Number 45 (Fin 45) "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others -- an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34" –For service contracts: Technical Bulletin Number 90-1, "Accounting for Separately Priced Extended Warranty and Product Maintenance Contract" WEBINAR Source: Warranty Week estimates

7. FASB Accounting Standards Codification In with the new –For manufacturer’s warranty: ASC Topic 460 – Guarantees –For service contracts: ASC Topic 605 - Revenue Recognition WEBINAR Source: Warranty Week estimates

8. WEBINAR Source: Warranty Week estimates

9. WEBINAR Source: Warranty Week estimates

10. WEBINAR Source: Warranty Week estimates

11. Example of an ASC 460-10-50-8b Methodology Disclosure from the HP Annual Report: WEBINAR Source: Warranty Week estimates

12. Example of an ASC 460-10-50-8c Tabular Disclosure from the HP Annual Report: WEBINAR Source: Warranty Week estimates

13. Hewlett-Packard Co. Warranty Claims & Accruals, 2003-2013 Quarterly Claims ($ Mil)Claims Rate (%) Accrual Rate (%) Source: Warranty Week from SEC data WEBINAR

15. Source: Warranty Week estimates

17. Eric Arnum, Editor Warranty Week 10520 66 th Road Forest Hills NY 11375-2179 USA +1 (718) 896-0367 http://www.warrantyweek.com earnum@warrantyweek.com WEBINAR Source: Warranty Week estimates