A warranty provision is a provision for expected costs to repair or replace products sold with guarantee commitments made to customers. Warranties are project (contract) specific and not always applicable.

In F&O, there is no out of the box solution for project warranty provisions. If the projects are subject to warranty, system should provide a functionality to provide the total warranty estimate, calculate the warranty provision automatically based on the percentage of completion and should post to the warranty provision automatically during the posting to the revenue recognition. And for the costs incurred during the warranty period, costs should be consumed from the Warranty provision.

There should be a functionality to consume in excess of warranty provision. If any deficit of balance in the warranty provision, it should transfer the balance to other accounts (lets say Special order costs).

If there is any balance is in the warranty provision at the end of the warranty period, the system should allow to reverse the balance in warranty provision.