Annual report pursuant to Section 13 and 15(d)

PRODUCT WARRANTY LIABILITY

v2.4.0.6
PRODUCT WARRANTY LIABILITY
12 Months Ended
Dec. 31, 2012
PRODUCT WARRANTY LIABILITY  
PRODUCT WARRANTY LIABILITY

NOTE 11. PRODUCT WARRANTY LIABILITY

        We charge the estimated costs of warranty programs, other than product recalls, to income at the time products are shipped to customers. We use historical claims experience to develop the estimated liability. We review product recall programs on a quarterly basis and, if necessary, record a liability when we commit to an action or when they become probable and estimable, which is reflected in the provision for warranties issued line. We also sell extended warranty coverage on several engines. The following is a tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued recall programs:

 
  December 31,  
In millions
  2012   2011  

Balance, beginning of year

  $ 1,014   $ 980  

Provision for warranties issued

    415     428  

Deferred revenue on extended warranty contracts sold

    210     124  

Payments

    (416 )   (409 )

Amortization of deferred revenue on extended warranty contracts

    (103 )   (95 )

Changes in estimates for pre-existing warranties

    (33 )   (7 )

Foreign currency translation

    1     (7 )
           

Balance, end of year

  $ 1,088   $ 1,014  
           

        Warranty related deferred revenue, supplier recovery receivables and the long-term portion of the warranty liability on our Consolidated Balance Sheets were as follows:

 
  December 31,    
In millions
  2012   2011   Balance Sheet Locations

Deferred revenue related to extended coverage programs

               

Current portion

  $ 111   $ 103   Deferred revenue

Long-term portion

    309     210   Other liabilities and deferred revenue
             

Total

  $ 420   $ 313    
             

Receivables related to estimated supplier recoveries

               

Current portion

  $ 7   $ 7   Trade and other receivables

Long-term portion

    6     7   Other assets
             

Total

  $ 13   $ 14    
             

Long-term portion of warranty liability

  $ 282   $ 279   Other liabilities and deferred revenue