Well-known audio/video and computer retailer Best Buy has surfaced as the first-known company to respond publicly to the SEC's new accounting guidelines that, in most cases, organizations must report income derived on the sale of extended warranties over the life of the warranty rather than at the time of the sale.
The SEC also is requiring issuers of warranties to go one step further by making the sales net commission revenues. Best Buy reported it has done this since the current warrranty plan began in fourth quarter 1996
The change will have little effect on shareholders, reports Best Buy.
For example, the combined earnings of the first two quarters of this fiscal year was only an effect of $2 million. That equates to a reduction of about 1 cent per share.