Guarantees

U.S. GAAP requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee. In addition, U.S. GAAP requires disclosures about the guarantees that an entity has issued, including a tabular reconciliation of the changes of the entity’s product warranty liabilities.

Accrual for Product Warranty Liabilities

We record a reduction to revenue for estimated product returns at the time revenue is recognized primarily based on historical return rates. Cost of revenue includes the estimated cost of product warranties. Under limited circumstances, we may offer an extended limited warranty to customers for certain products. Additionally, we accrue for known warranty and indemnification issues if a loss is probable and can be reasonably estimated. The estimated product warranty liabilities for the three and six months ended July 29, 2012 and July 31, 2011 were as follows:



	Three Months Ended						Six Months Ended
	July 29,			July 31,			July 29,			July 31,
	2012			2011			2012			2011
	(In thousands)
Balance at beginning of period (1)	$	17,070		$	80,724		$	18,406		$	107,896
Additions	1,678			1,578			3,357			2,984
Deductions (2)	(2,211		)	(28,484		)	(5,226		)	(57,062		)
Balance at end of period	$	16,537		$	53,818		$	16,537		$	53,818

(1) Includes $11.6 million and $13.2 million for the three and six months ended July 29, 2012, respectively, and $76.4 million and $103.7 million for the three and six months ended July 31, 2011, respectively, related to warranty accrual associated with incremental repair and replacement costs from a weak die/packaging material set.

(2) Includes $0.7 million and $1.9 million for the three and six months ended July 29, 2012, respectively, and $16.7 million and $23.4 million for the three and six months ended July 31, 2011, respectively, in payments related to the warranty accrual associated with incremental repair and replacement costs from a weak die/packaging material set.

In connection with certain agreements that we have executed in the past, we have at times provided indemnities to cover the indemnified party for matters such as tax, product and employee liabilities. We have also on occasion included intellectual property indemnification provisions in our technology related agreements with third parties. Maximum potential future payments cannot be estimated because many of these agreements do not have a maximum stated liability. As such, we have not recorded any liability in our Condensed Consolidated Financial Statements for such indemnifications.