Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following at:



	October 31, 2017		July 31, 2017
Accrued wages and benefits	$	20,436,000	19,622,000
Accrued warranty obligations	13,001,000		17,617,000
Accrued contract costs	8,363,000		8,644,000
Accrued legal costs	7,983,000		8,402,000
Accrued commissions and royalties	2,540,000		3,600,000
Other	10,780,000		10,725,000
Accrued expenses and other current liabilities	$	63,103,000	68,610,000

Accrued legal costs as of October 31, 2017 and July 31, 2017 include $3,739,000 and $4,120,000, respectively, related to estimated costs associated with certain TCS intellectual property matters. The accrued potential settlement costs do not reflect the final amounts we may actually pay. Ongoing legal costs associated with defending the legacy TCS intellectual property matters and the ultimate resolution could vary and have a material adverse effect on our future consolidated results of operations, financial position or cash flows. TCS intellectual property matters are discussed in more detail in Note (18) - "Legal Proceedings and Other Matters."

Accrued contract costs represent direct and indirect costs on contracts as well as estimates of amounts owed for invoices not yet received from vendors or reflected in accounts payable.

Accrued warranty obligations relate to estimated liabilities for warranty coverage that we provide to our customers. We generally provide warranty coverage for some of our products for a period of at least one year from the date of delivery. We record a liability for estimated warranty expense based on historical claims, product failure rates, a consideration of contractual obligations, future costs to resolve software issues and other factors. Some of our product warranties are provided under long-term contracts, the costs of which are incorporated into our estimates of total contract costs.

Changes in our current accrued warranty obligations during the three months ended October 31, 2017 and 2016 were as follows:



	Three months ended October 31,
	2017			2016
Balance at beginning of period	$	17,617,000		15,362,000
Provision for warranty obligations	1,106,000			1,083,000
Charges incurred	(1,830,000		)	(1,461,000		)
Warranty settlement (see below)	(3,892,000		)	—
Balance at end of period	$	13,001,000		$	14,984,000

Our current accrued warranty obligations at October 31, 2017 and July 31, 2017 include $5,546,000 and $9,909,000, respectively, of warranty obligations for a small product line that we refer to as the TCS 911 call handling software solution. This solution was licensed to customers prior to our acquisition of TCS. During the three months ended October 31, 2017, we entered into a full and final warranty settlement with AT&T, the largest customer/distributor of this product line, pursuant to which we issued thirty-six credits to AT&T of $153,000 which AT&T can apply on a monthly basis to purchases of solutions from us, beginning October 2017 through September 2020. As of October 31, 2017, the total present value of these monthly credits is $4,721,000, of which $1,489,000 is included in our current accrued warranty obligations and $3,232,000 is reflected in other liabilities (non-current) on our Condensed Consolidated Balance Sheet. In connection with this favorable settlement, we recorded a benefit to cost of sales of $660,000.