Guarantees

9 Months Ended

Sep. 30, 2018

Guarantees and Product Warranties [Abstract]

Guarantees

Note 10. Guarantees

Warranty

ARRIS provides warranties of various lengths to customers based on the specific product and the terms of individual agreements. The Company provides for the estimated cost of product warranties based on historical trends, the embedded base of product in the field, failure rates, and repair costs at the time revenue is recognized. Expenses related to product defects and unusual product warranty problems are recorded in the period that the problem is identified. While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its suppliers, the estimated warranty obligation could be affected by changes in ongoing product failure rates, material usage and service delivery costs incurred in correcting a product failure, as well as specific product failures outside of ARRIS’s baseline experience. If actual product failure rates, material usage or service delivery costs differ from estimates, revisions (which could be material) would be recorded to the warranty liability.

The Company offers extended warranties and support service agreements on certain products. Revenue from these agreements is deferred at the time of the sale and recognized on a straight-line basis over the contract period. Costs of services performed under these types of contracts are charged to expense as incurred, which approximates the timing of the revenue stream.

Information regarding the changes in ARRIS’s aggregate product warranty liabilities for the nine months ended September 30, 2018 was as follows (in thousands):

Balance at December 31, 2017	$	76,089
Warranty reserve at acquisition adjustment		827
Accruals related to warranties (including changes in assumptions)		24,958
Settlements made (in cash or in kind)		(33,790	)
Balance at September 30, 2018	$	68,084

The decline in the warranty accrual resulted from lower sales volume of CPE products, accompanied by settlement of warranty claims for amounts less than their previously recorded value.