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Valuation and Qualifying Accounts
 12 Months Ended
Dec. 31, 2016
Receivables [Abstract]  
VALUATION AND QUALIFYING ACCOUNTS
VALUATION AND QUALIFYING ACCOUNTS
Valuation and qualifying accounts included the following:
 
 
 
(in thousands)
Balance
Beginning of
Year
 
Net
Charged to
Costs and
Expenses
 
 Translations,
Reclassifications
and Acquisitions
 
 Net Write-Offs or
Discounts Taken
 
Balance
End of
Year
2016
 
 
 

 
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
3,484

 
$
482

 
 
$
101

 
 
$
(1,566
)
 
$
2,501

Reserve for sales discounts
15,094

 
77,126

 
 
(109
)
 
 
(78,623
)
 
13,488

Reserve for inventory obsolescence
9,675

 
2,041

 
 
295

 
 
(4,749
)
 
7,262

Reserve for warranty
5,566

 
7,867

 
 
(49
)
 
 
(8,122
)
 
5,262

2015
 

 
 

 
 
 

 
 
 

 
 

Allowance for doubtful accounts
$
2,853

 
$
965

 
 
$
(185
)
 
 
$
(149
)
 
$
3,484

Reserve for sales discounts
15,999

 
78,304

 
 
(145
)
 
 
(79,064
)
 
15,094

Reserve for inventory obsolescence
7,601

 
5,209

 
 
(454
)
 
 
(2,681
)
 
9,675

Reserve for warranty
5,913

 
7,732

 
 
(325
)
 
 
(7,754
)
 
5,566

2014
 

 
 

 
 
 

 
 
 

 
 

Allowance for doubtful accounts
$
2,738

 
$
469

 
 
$
(153
)
 
 
$
(201
)
 
$
2,853

Reserve for sales discounts
16,724

 
79,877

 
 
(98
)
 
 
(80,504
)
 
15,999

Reserve for inventory obsolescence
8,596

 
2,938

 
 
(297
)
 
 
(3,636
)
 
7,601

Reserve for warranty
4,994

 
7,467

 
 
843

 
 
(7,391
)
 
5,913


 
Allowance for Doubtful Accounts
 
The Company evaluates the collectability of its accounts receivable based on a combination of factors. In circumstances where it is aware of a specific customer’s inability to meet its financial obligations, the Company records a specific reserve to reduce the amounts recorded to what it believes will be collected.
 
The Company evaluates all receivables that are over 60 days old and will reserve specifically on a 90-day basis. The Company has a secured or insured interest on most of its wholegoods that each customer purchases. This allows the Company, in times of a difficult economy when the customer is unable to pay or has filed for bankruptcy, to repossess its inventory. This also allows Alamo Group, in certain instances, to maintain only a reserve over its cost, which usually represents the margin on the original sales price.
 
The allowance for doubtful accounts balance was $2,501,000 on December 31, 2016, and $3,484,000 on December 31, 2015. The decrease was primarily from the Company's U.S. operations.

Sales Discounts
 
On December 31, 2016, the Company had $13,488,000 in reserves for sales discounts compared to $15,094,000 on December 31, 2015 on product shipped to our customers under various promotional programs. The decrease was due primarily to lower sales volume of the Company’s agricultural products during the 2015 preseason, which runs during the third and fourth quarters of each year with orders shipped through the second quarter of 2016. The Company reviews the reserve quarterly based on analysis made on each program outstanding at the time.
 
The Company bases its reserves on historical data relating to discounts taken by the customer under each program. Historically, between 90% and 95% of the Company’s customers who qualify for each program actually take the discount that is available.
 
Inventories – Obsolete and Slow Moving
 
The Company had a reserve of $7,262,000 on December 31, 2016 and $9,675,000 on December 31, 2015 to cover obsolete and slow moving inventory. The decrease in the reserve was mainly from the Company's Industrial Division. The obsolete and slow moving inventory policy states that the reserve is to be calculated as follows: 1) no inventory usage over a three-year period is deemed obsolete and reserved at 100 percent; and 2) slow moving inventory with little usage requires a 100 percent reserve on items that have a quantity greater than a three-year supply. There are exceptions to the obsolete and slow moving classifications if approved by an officer of the Company, based on specific identification of an item or items that are deemed to be either included or excluded from this classification. In cases where there is no historical data, management makes a judgment based on a specific review of the inventory in question to determine what reserves, if any, are appropriate. New products or parts are generally excluded from the reserve policy until a three-year history has been established.
 
Warranty
 
The Company’s warranty policy is generally to provide its customers warranty for up to one year on all wholegood units and 90 days on parts, though some components can have warranty for longer terms.
 
Warranty reserve, as a percentage of sales, is generally calculated by looking at the current twelve months’ expenses and prorating that amount based on twelve months’ sales with a ninety-day to six-month lag period. The Company’s historical experience is that an end-user takes approximately 90 days to six months from the receipt of the unit to file a warranty claim. A warranty reserve is established for each different marketing group. Reserve balances are evaluated on a quarterly basis and adjustments made when required.
 
The current liability warranty reserve balance was $5,262,000 on December 31, 2016 and $5,566,000 on December 31, 2015 and are included in Note 8. The decrease was primarily in the Company's U.S. operations.