Cummins Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

PRODUCT WARRANTY LIABILITY

PRODUCT WARRANTY LIABILITY

6 Months Ended

Jun. 29, 2014

Product Warranties Disclosures [Abstract]

NOTE 10. PRODUCT WARRANTY LIABILITY

We charge the estimated costs of warranty programs, other than product recalls, to income when the sale is recorded. 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. A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued recall programs was as follows:



	Six months ended
In millions	June 29, 2014			June 30, 2013
Balance, beginning of year	$	1,129		$	1,088
Provision for warranties issued	206			227
Deferred revenue on extended warranty contracts sold	118			93
Payments	(211		)	(210		)
Amortization of deferred revenue on extended warranty contracts	(71		)	(56		)
Changes in estimates for pre-existing warranties	12			(13		)
Foreign currency translation	2			(6		)
Balance, end of period	$	1,185		$	1,123

Warranty related deferred revenue, supplier recovery receivables and the long-term portion of the warranty liability on our June 29, 2014, balance sheet were as follows:



In millions	June 29, 2014		Balance Sheet Location
Deferred revenue related to extended coverage programs
Current portion	$	155	Deferred revenue
Long-term portion	386		Other liabilities and deferred revenue
Total	$	541

Receivables related to estimated supplier recoveries
Current portion	$	13	Trade and other receivables
Long-term portion	4		Other assets
Total	$	17

Long-term portion of warranty liability	$	291	Other liabilities and deferred revenue