NOTE 10. WARRANTY RESERVES

We provide for the estimated future costs to be incurred under our standard warranty obligation on our instruments and reagent discs.

Instruments. Our standard warranty obligation on instruments ranges from one to five years, depending on the specific product. The estimated contractual warranty obligation is recorded when the related revenue is recognized and any additional amount is recorded when such cost is probable and can be reasonably estimated. Cost of revenues reflects estimated warranty expense for instruments sold in the current period and any adjustments in estimated warranty expense for the installed base under our standard warranty obligation based on our quarterly evaluation of service experience. The estimated accrual for warranty exposure is based on historical experience as to product failures, estimated product failure rates, estimated repair costs, material usage and freight incurred in repairing the instrument after failure and known design changes under the warranty plan. Management periodically evaluates the sufficiency of the warranty provisions and makes adjustments when necessary. If an unusual performance rate related to warranty claims is noted, an additional warranty accrual may be assessed and recorded when a failure event is probable and the cost can be reasonably estimated. Total current and non-current accrued warranty reserve related to instruments as of December 31, 2017 and March 31, 2017 was $4.4 million and $3.8 million, respectively.

Reagent Discs. We record a provision for defective reagent discs when the related sale is recognized and any additional amount is recorded when such cost is probable and can be reasonably estimated. The warranty cost includes the replacement costs and freight of a defective reagent disc. The balance of accrued warranty reserve related to replacement of defective reagent discs as of December 31, 2017 and March 31, 2017 was $0.6 million and $0.6 million, respectively, which was classified as a current liability on the condensed consolidated balance sheets.

We evaluate our estimates for warranty reserves on an ongoing basis and believe we have the ability to reasonably estimate warranty costs. However, unforeseeable changes in factors may impact the estimate for warranty and such changes could cause a material change in our warranty reserve accrual in the period in which the change was identified.

The change in our accrued warranty reserve during the three and nine months ended December 31, 2017 and 2016 is summarized as follows (in thousands):

	Three Months Ended December 31,						Nine Months Ended December 31,
	2017			2016			2017			2016
Balance at beginning of period	$	4,759		$	3,950		$	4,358		$	3,208
Provision for warranty expense		811			568			2,273			2,068
Warranty costs incurred		(577	)		(325	)		(1,638	)		(1,083	)
Balance at end of period		4,993			4,193			4,993			4,193
Non-current portion of warranty reserve		2,864			2,616			2,864			2,616
Current portion of warranty reserve	$	2,129		$	1,577		$	2,129		$	1,577