WARRANTY OBLIGATIONS

Expected warranty costs for products sold are recognized principally at the time of sale of the product based on an estimate of the amount that will eventually be required to settle such obligations. These accruals are based on factors such as past experience, production changes, industry developments and various other considerations. The estimated costs related to product recalls based on a formal campaign soliciting return of that product are accrued at the time an obligation becomes probable and can be reasonably estimated. These estimates are adjusted from time to time based on facts and circumstances that impact the status of existing claims. Aptiv has recognized its best estimate for its total aggregate warranty reserves, including product recall costs, across all of its operating segments as of December 31, 2017. The Company estimates the reasonably possible amount to ultimately resolve all matters in excess of the recorded reserves as of December 31, 2017 to be zero to $25 million.

The table below summarizes the activity in the product warranty liability for the years ended December 31, 2017 and 2016:



	Year Ended December 31,
	2017			2016
	(in millions)
Accrual balance at beginning of year	$	65		$	31
Provision for estimated warranties incurred during the year	47			49
Changes in estimate for pre-existing warranties	45			13
Settlements made during the year (in cash or in kind)	(103		)	(25		)
Foreign currency translation and other	4			(3		)
Accrual balance at end of year	$	58		$	65

In September 2016, one of the Company's OEM customers initiated a recall to enhance airbag deployment systems in certain vehicles. Aptiv's Advanced Safety and User Experience segment had supplied sensors and related control modules for the airbags in the affected vehicles. During the first quarter of 2017, Aptiv reached an agreement with its customer related to this matter. In addition to the Company's previously recorded reserve estimate, Aptiv recognized an incremental $43 million of warranty expense within cost of sales during the year ended December 31, 2017 related to this matter.