Warranties are a common feature in contracts for the sale of goods and services. Under IFRS 15, the accounting treatment for warranties depends on whether the warranty provides a service to the customer in addition to the assurance that the product complies with agreed-upon specifications (commonly referred to as an 'assurance-type warranty').

1. Assurance-Type Warranties: If a warranty is assurance-type, meaning it simply ensures that the product sold functions as expected, this does not constitute a separate performance obligation. The warranty is viewed as an implicit part of the agreement to transfer the goods or services promised, and the revenue is recognised at the point of sale.
2. Service-Type Warranties: If a warranty provides an additional service beyond the assurance that the product complies with agreed-upon specifications (service-type warranty), it is considered a separate performance obligation. For example, if a customer has the option to purchase a warranty separately, it would be considered a service-type warranty. The transaction price is allocated between the good or service and the warranty based on their standalone selling prices, and the revenue for the warranty is recognized over the period the warranty service is provided.
3. Extended Warranties and Service Contracts: If a warranty or a service contract extends beyond a fixed warranty period, it is generally considered as a separate performance obligation. The revenue associated with this separate performance obligation would typically be recognised over the period the warranty or service is provided.

Under IFRS 15, an entity is required to assess the nature of its warranties and determine whether they are assurance-type warranties or service-type warranties. This assessment will then determine how revenue should be recognised in relation to these warranties.