NOTE E - Product Support Liabilities

Product support liabilities are estimated future payments related to product warranties, optional extended warranties and repair and maintenance (R&M) contracts. The Company generally offers one year warranties covering most of its vehicles and related aftermarket parts. For vehicles equipped with engines manufactured by PACCAR, the Company generally offers two year warranties on the engine. Specific terms and conditions vary depending on the product and the country of sale. Optional extended warranty and R&M contracts can be purchased for periods which generally range up to five years. Warranty expenses and reserves are estimated and recorded at the time products or contracts are sold based on historical data regarding the source, frequency and cost of claims, net of any recoveries. The Company periodically assesses the adequacy of its recorded liabilities and adjusts them as appropriate to reflect actual experience. Revenue from extended warranty and R&M contracts is deferred and recognized to income generally on a straight-line basis over the contract period. Warranty and R&M costs on these contracts are recognized as incurred.

Changes in product support liabilities are summarized as follows:


Warranty Reserves	2016			2015
Balance at January 1	$	346.2		$	310.8
Cost accruals		109.3			150.0
Payments		(128.8	)		(112.6	)
Change in estimates for pre-existing warranties		(2.8	)		(3.2	)
Currency translation		(4.0	)		(3.5	)

Balance at June 30	$	319.9		$	341.5


Deferred Revenues on Extended Warranties and R&M Contracts	2016			2015
Balance at January 1	$	524.8		$	462.0
Deferred revenues		192.0			164.9
Revenues recognized		(135.9	)		(124.3	)
Currency translation		(7.0	)		(11.3	)

Balance at June 30	$	573.9		$	491.3