Current Liabilities

Accrued expenses as of December 31, 2014 and 2013 consisted of accruals for the following (in thousands):



	2014		2013
Salaries and wages	$	41,193	$	39,861
Taxes other than income taxes, primarily Value Added Taxes	24,812		24,525
Warranty cost	30,738		27,393
Supplemental Executive Retirement Plan (SERP)	21,517		391
Freight	6,202		7,636
Professional	6,723		6,516
Product liability, current portion	4,334		3,183
Rebates	1,722		1,681
Insurance	1,266		2,549
Interest	1,068		1,041
Derivatives (foreign currency forward exchange contracts)	2,526		1,212
Severance	4,209		3,986
Other items, principally trade accruals	10,165		13,126
	$	156,475	$	133,100

The increase in the SERP liability in 2014 is the result of a reclassification of this liability from Other Long-Term Obligations to Current Liabilities as a result of the retirement of four senior executive officers of the Company. The majority of this liability is expected to be paid out by the end of the third quarter of 2015, which will negatively impact the operating cash flows of the Company.

Accrued rebates relate to several volume incentive programs the Company offers its customers. The Company accounts for these rebates as a reduction of revenue when the products are sold in accordance with the guidance in ASC 605-50, Customer Payments and Incentives.

Generally, the Company's products are covered by warranties against defects in material and workmanship for various periods depending on the product from the date of sales to the customer. Certain components carry a lifetime warranty. A provision for estimated warranty cost is recorded at the time of sale based upon actual experience. The Company continuously assesses the adequacy of its product warranty accrual and makes adjustments as needed. Historical analysis is primarily used to determine the Company's warranty reserves. Claims history is reviewed and provisions are adjusted as needed. However, the Company does consider other events, such as a product field action and recalls, which could warrant additional warranty reserve provision.

Changes in accrued warranty costs were as follows (in thousands):



	2014			2013
Balance as of January 1	$	27,393		$	21,451
Warranties provided during the period	21,472			10,831
Settlements made during the period	(22,752		)	(13,452		)
Changes in liability for pre-existing warranties during the period, including expirations	4,625			8,563
Balance as of December 31	$	30,738		$	27,393

The Company's warranty expense for 2014 includes $11,493,000 for three specific product issues. First, an expense of $6,559,000 for a recall related to a component in a stationary oxygen concentrator that was manufactured in the Company’s facility in Suzhou, China, and sold globally, which is no longer used in production. This expense was recorded in the European segment ($3,395,000) and North America/HME segment ($3,164,000). Second, an expense of $2,057,000 for the recall of a sieve bed component used within stationary oxygen concentrators manufactured during August 2014, which was recorded in the North America/HME segment. Third, an incremental expense of $2,877,000 related to the Company's joystick recall as a result of higher than previously anticipated response rates from larger customers in the U.S. and Canada and a shift in the product mix toward higher cost joysticks, which was recorded in the North America/HME segment ($1,612,000) and the Asia/Pacific segment ($1,265,000). These warranty reserves are subject to adjustment in future periods as new developments change the Company's estimate of the total cost of these matters.

The warranty expense for 2013 included an increase in warranty expense of $7,264,000 related to the power wheelchair joystick recall, the impact of which was recorded in the Asia/Pacific ($4,639,000) and the North America/HME segment ($2,625,000).