9. GUARANTEES

Warranty

The Company provides for the estimated costs of product warranties at the time revenue is recognized. The specific terms and conditions of those warranties vary depending upon the product sold. In the case of hardware manufactured by Polycom, warranties generally start from the delivery date and continue for one year. Software products generally carry a 90-day warranty from the date of shipment. The Company’s liability under warranties on software products is to provide a corrected copy of any portion of the software found not to be in substantial compliance with the agreed upon specifications. Factors that affect the Company’s warranty obligation include product failure rates, material usage and service delivery costs incurred in correcting product failures. The Company assesses the adequacy of its recorded warranty liabilities every quarter and makes adjustments to the liability if necessary.

Changes in the warranty obligation which is included as a component of “Other accrued liabilities” on the condensed consolidated balance sheets during the periods are as follows (in thousands):

	Three Months Ended
	September 30, 2013			September 30, 2012				September 30, 2013				September 30, 2012
Balance at beginning of period	$	9,686		$	9,950		$		10,475		$		10,577
Accruals for warranties issued during the period		4,295			5,376				12,407				14,839
Actual charges against warranty reserve during the period		(4,270	)		(4,848	)			(13,171	)			(14,938	)
Balance at end of period	$	9,711		$	10,478		$		9,711		$		10,478

Deferred Services Revenue

The Company offers maintenance contracts for sale on most of its products which allow for customers to receive service and support in addition to, or subsequent to, the expiration of the contractual product warranty. The Company also provides managed services to its customers under contractual arrangements. The Company recognizes the maintenance and managed services revenue from these contracts over the life of the service contract.

Deferred services revenue of $170.6 million and $156.5 million is short-term and is included as a component of “Deferred revenue” as of September 30, 2013 and December 31, 2012, respectively, and $83.4 million and $85.3 million is long-term and is included in “Long-term deferred revenue” as of September 30, 2013 and December 31, 2012, respectively, on the condensed consolidated balance sheets.

Changes in the three and nine months ended September 30, 2013 and 2012 are as follows (in thousands):

	Three Months Ended							Nine Months Ended
	September 30, 2013			September 30, 2012				September 30, 2013				September 30, 2012
Balance at beginning of period	$	252,091		$	229,615		$		241,773		$		212,178
Additions to deferred services revenue		87,993			86,157				268,392				258,777
Amortization of deferred services revenue		(86,114	)		(80,259	)			(256,195	)			(235,442	)
Balance at end of period	$	253,970		$	235,513		$		253,970		$		235,513

The cost of providing these services for the three and nine months ended September 30, 2013 was $37.3 million and $110.7 million, respectively. The cost of providing these services for the three and nine months ended September 30, 2012 was $35.5 million and $102.2 million, respectively.

Officer and Director Indemnifications

As permitted or required under Delaware law and to the maximum extent allowable under that law, the Company has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was serving, at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification obligations is unlimited; however, the Company has a director and officer insurance policy that mitigates the Company’s exposure and enables the Company to recover a portion of any future amounts paid. As a result of the Company’s insurance policy coverage, the Company believes the estimated fair value of these indemnification obligations is not material.

Other Indemnifications

As is customary in the Company’s industry, as provided for in local law in the U.S. and other jurisdictions, the Company’s standard contracts provide remedies to its customers, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of its products. From time to time, the Company indemnifies customers against combinations of loss, expense, or liability arising from various trigger events related to the sale and the use of its products and services. In addition, from time to time the Company also provides protection to customers against claims related to undiscovered liabilities, additional product liability or environmental obligations.