Balance Sheet Components

Inventories

Inventories consist of the following (in thousands):



	September 30, 2016		December 31, 2015
Raw materials	$	12,018	$	9,950
Work in process	1,488		7,067
Finished goods	12,835		2,448
Total Inventories	$	26,341	$	19,465

Work in process includes costs to produce our clear aligner and intra-oral products. Finished goods primarily represent our intra-oral scanners and ancillary products that support our clear aligner products.

Accrued liabilities

Accrued liabilities consist of the following (in thousands):



	September 30, 2016		December 31, 2015
Accrued payroll and benefits	$	65,848	$	55,430
Accrued sales and marketing expenses	14,303		7,071
Accrued sales rebates	9,258		8,486
Accrued sales tax and value added tax	6,087		4,801
Accrued income taxes	5,043		2,646
Accrued professional fees	4,947		2,775
Accrued warranty	3,397		2,638
Other accrued liabilities	23,655		23,918
Total Accrued Liabilities	$	132,538	$	107,765

Warranty

We regularly review the accrued warranty balances and update these balances based on historical warranty trends. Actual warranty costs incurred have not materially differed from those accrued; however, future actual warranty costs could differ from the estimated amounts.

Clear Aligner

We warrant our Invisalign products against material defects until the Invisalign case is complete. We accrue for warranty costs in cost of net revenues upon shipment of products. The amount of accrued estimated warranty costs is primarily based on historical experience as to product failures as well as current information on replacement costs.

Scanners

We warrant our scanners for a period of one year and accrue for these warranty costs which includes materials and labor based on estimated historical repair costs. Extended service packages may be purchased for additional fees.

Warranty accrual as of September 30, 2016 and 2015 consists of the following activity (in thousands):



	Nine Months Ended September 30,
	2016			2015
Balance at beginning of period	$	2,638		$	3,148
Charged to cost of net revenues	3,440			1,308
Actual warranty expenditures	(2,681		)	(1,745		)
Balance at end of period	$	3,397		$	2,711