Extended Protection Plans

3 Months Ended

Apr. 29, 2016

Note 5: Extended Protection Plans - The Company sells separately-priced extended protection plan contracts under a Lowe’s-branded program for which the Company is self-insured. The Company recognizes revenue from extended protection plan sales on a straight-line basis over the respective contract term. Extended protection plan contract terms primarily range from one to four years from the date of purchase or the end of the manufacturer’s warranty, as applicable. Changes in deferred revenue for extended protection plan contracts are summarized as follows:



	Three Months Ended
(In millions)	April 29, 2016			May 1, 2015
Deferred revenue - extended protection plans, beginning of period	$	729		$	730
Additions to deferred revenue	86			82
Deferred revenue recognized	(89		)	(85		)
Deferred revenue - extended protection plans, end of period	$	726		$	727

Incremental direct acquisition costs associated with the sale of extended protection plans are also deferred and recognized as expense on a straight-line basis over the respective contract term. Deferred costs associated with extended protection plan contracts were $18 million at April 29, 2016, $27 million at May 1, 2015, and $20 million at January 29, 2016. The Company’s extended protection plan deferred costs are included in other assets (noncurrent) on the consolidated balance sheets. All other costs, such as costs of services performed under the contract, general and administrative expenses, and advertising expenses are expensed as incurred.

The liability for extended protection plan claims incurred is included in other current liabilities on the consolidated balance sheets and was not material in any of the periods presented. Expenses for claims are recognized when incurred and totaled $30 million and $29 million for the three months ended April 29, 2016 and May 1, 2015, respectively.