I have a small Ltd Co client, (y/e 30 09 2016 - FRSSE Jan 2015).
In recent years there has been a large provision for warranties. As a new clietn I have asked for the basis of the provisions and it would seem that there is none. Its been increased when profits are high and decreased when profits are low.
I;ve asked to see the contracts with clients to establish what warranty is given. There are none. I;ve asked what has been spent post year end on warranty claims and he has no idea, its never been tracked.
Its H&W Ltd Co on £11k salary. Surely the provision should only cover his actual expenses to rectify an issue - not a high hourly rate. If a product failed he would drop everything and travel to the client (overseas) and fix the problem, If the issue was the parts then the parts cost would be covered under his supplier guarantees so the only cost would be the travel expenses and time.
How does this work with your clients? What evidence would you want on file? Im not being unreasonable asking for some justification am I?